How COVID has hammered women’s financial health

Faith Archer

by , Personal Finance Journalist and Blogger

at Much More With Less

04 Mar 2021 /  

Shop door with a sign that reads

Coronavirus has had a disproportionate effect on women, especially working mothers – but there are ways to lessen the financial damage.

For International Women’s Day, I wanted to highlight how the pandemic has dug the existing gender pay and pensions gaps even deeper. When it comes to money and careers, we’re not all in this together. Far from it. School closures, job losses, furlough and the move to working from home have all combined to hit women hard, widening existing inequalities.

A spokesperson for equality campaigners the Fawcett Society said: “We know more women have been furloughed, have lost their jobs, have had their hours cut, and have had greater disruption due to homeschooling than men. And we know that the impact on disabled women, black women, and other minority groups has been even worse.”

The net result? Coronavirus has slashed income and the potential to save, condemning many women to poverty now and in old age.

Disappearing jobs

First, job losses. Women are more likely to be employed in the worst-affected sectors such as retail and hospitality. So although women make up 39% of global employment, they account for 54% of overall job losses, according to research by management consultants McKinsey.

Similarly, think tank the Institute for Fiscal Studies (IFS) found after the first lockdown that mothers were 23% more likely than fathers to have lost their jobs (temporarily or permanently). Of those who were in paid work prior to the lockdown, mothers are 47% more likely than fathers to have permanently lost their job or quit, and they are 14% more likely to have been furloughed.

Forced to quit

Even if their jobs didn’t disappear, working mothers faced hideous decisions when childcare was swept away, whether due to schools and nurseries closing, or grandparents being unable to look after children during lockdown.

Women are over-represented in front line roles working outside the home, such as nursing and caring, which can be impossible to continue without childcare. Sure, parents can request furlough to help cope, but employers are not required to agree.

In fact nearly three-quarters (71%) of working mums who applied for furlough during the latest school closures had their requests turned down, according to a survey by the Trades Union Congress (TUC). Many women have therefore been forced to quit, cut hours or take unpaid leave.

Tricky juggling while working from home

Even mothers who can work from home faced problems juggling work and childcare. As a mother of two, I know only too well that it’s just not possible to work productively and supervise schoolwork at the same time.

Like many women, I chose to work part-time after my kids were born. I shifted to self-employment for more flexibility around school hours. My husband and I are incredibly lucky that our work continued despite coronavirus. I work from home anyway, so that wasn’t an issue.

However, during the day I normally work alone in glorious peace. Successive lockdowns meant suddenly I was joined 24/7 by my husband and two children, while simultaneously supervising home learning. It’s not that my husband doesn’t pull his weight. But he is employed full-time, so it was easier for me, being self-employed, to dial down work so I could cope with childcare.

Combined impact of individual decisions

Similar decisions by individual families have been repeated up and down the country. When it’s a choice between a full-time role that pays the mortgage, and part-time or lower paid work, it’s more likely the lower income goes by the wayside.

And the lower income is more frequently female, partly due to the gender pay gap, and partly because women are more likely than men to work part-time, be on temporary contracts, be on zero-hours contracts and earn minimum wage. For single parents, or households where one parent leaves the house for work, for example as a key worker or builder, there may be no choice about which partner shoulders remote learning.

The TUC survey found that a quarter (25%) of mothers were using annual leave to manage their childcare – but nearly 1 in 5 (18%) had been forced to reduce their working hours, and around 1 in 14 (7%) were taking unpaid leave from work and receiving no income. The IFS also found that mothers still being paid to work reduced their hours substantially, and by more than men.

COVID can also stitch up future career prospects. Women experienced more interruptions than men, according to the IFS, which will affect performance at work and promotions. Many older women have seen coronavirus rip up their retirement plans, either forced to retire earlier than expected, or forced to continue working for longer before they can afford to quit.

Financial impact for women

Job losses, furlough, reduced working hours and time off all lead to less money coming in, and therefore less to set aside in savings or pensions. Government schemes designed to provide financial support overlooked the labour market and caring inequalities faced by women, according to parliament’s Women and Equalities Committee.

For example, even those who qualified for the self-employment income support scheme (SEISS) may have received less due to motherhood. Grants were based on the average of self-employed earnings over a three-year period – with no allowance for lower or no income during maternity leave. Also, although the government extended statutory sick pay, women are less likely to qualify for this safety net, due to low or intermittent pay, zero-hours contracts or low earnings and hours.

No wonder almost half of mothers (44%) told the TUC they were worried about the impact of taking time off work on their household finances. Women have paid the price for the pandemic in soaring debts, smaller savings and squeezed pensions.

Worse pension prospects

On average, women live longer than men, so need more money to cover retirement. However, due to the prevalence of lower pay, career breaks and part-time working, women consistently reach retirement age with smaller pension pots than men.

Pensions belonging to women are around 40% less than those belonging to men, according to PensionBee customer data. The gender pension gap increases by age, so that by the time they reach their 50s, men have a pot that’s almost twice the size as women.

Right now, women over 65 are twice as likely as men to say the State Pension is their main source of income, according to the Financial Lives Survey conducted by the Financial Conduct Authority. Paying even a small amount into a pension every month could therefore make a big difference, come retirement.

How to turn your financial position around

The pandemic may have set back pay equality by decades, but there are ways to improve your own financial situation:

  • Start by paying down debt at expensive interest rates, such as credit cards, overdrafts, catalogue credit or shopping accounts

  • Build financial resilience by scraping together some emergency savings

  • Improve your financial future by reinstating or increasing pension payments, and grab the free money added in tax relief. If your employer offers a pension, you’ll get employer contributions too.

    Even if you’re not working, you can pay £2,880 a year into a pension and the government will top it up to £3,600 (thanks to tax relief).

  • Make your money work harder, by switching from saving to investing, once you have amassed some emergency cash

  • See what you’ll get from the State Pension by checking online. If you have gaps in your National Insurance Contributions, normally you can only go back up to six years when making voluntary contributions to fill them.

  • If family income has dropped due to COVID, check if you qualify for anything extra:

    Get money just for being married or in a civil partnership, where one half is a basic-rate taxpayer and the other doesn’t earn enough to pay income tax. The Marriage Allowance is worth £250 this year, but up to £1,188 when backdated.

    Claim Child Benefit payments where the highest earner brings in £60,000 a year or less.

  • If you’re a low earner or self-employed it’s even more important to put aside some money each month however small, for retirement. The benefits of compounding could help turn a small pot into a sizable amount over the long-term.

    If you’re just getting started PensionBee has a dedicated self-employed pension that you can contribute to as your income allows, with no minimum saving amounts.

Faith Archer is a Personal Finance Journalist and Money Blogger at Much More With Less. Check out Faith and Lynn’s videos about spending during lockdown and after lockdown.

Risk warning: As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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