How IFISAs can help tackle the gender investment gap
Women hold more ISAs than men, but an over-reliance on cash ISAs means that the gender ISA gap has doubled in a decade.
New research from Hargreaves Lansdown has found that men are more likely to invest their money in a stocks and shares ISA, while women favour cash ISAs. As a result, men have £2,991 more in their ISAs than women.
This is likely due to the fact that cash ISAs have consistently offered rates of less than one per cent per year to savers during a decade of austerity measures, low interest rates, and the Covid-19 pandemic.
Although the stock market has experienced significant volatility, for many stocks and shares investors the rewards outweigh the risks.
But there is another option for ISA holders: the Innovative Finance ISA (IFISA).
New analysis from Peer2Peer Finance News has found that over the past four years, IFISAs have dramatically outperformed the FTSE All-Share.
Between February 2018 and 2022, IFISAs returned between 7.8 per cent and nine per cent per year.
By contrast, the FTSE All-Share returned 18.3 per cent in 2021, -9.8 per cent in 2020, 19.2 per cent in 2019 and -9.5 per cent in 2018.
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This means that £20,000 invested in a FTSE All-Share tracker fund in January 2018 would have been worth £23,022.16 by February 2022. If that same £20,000 had been invested in an IFISA it would have been worth £27,851.66 by February of this year – a difference of almost £5,000.
By transferring at least some of their annual ISA allowance into an IFISA, women could effectively wipe out the gender ISA gap within a few short years.
Hargreaves Lansdown noted that in 2021 women were increasingly likely to transfer their cash ISA to stocks and shares ISAs, suggesting that more women are ready to move away from the low-risk, low-reward model of the cash ISA. 42 per cent of women moved money from a cash ISA into a stocks and shares ISA last year, compared to 37 per cent in 2020.
“Despite the super-human effort women are making to build their savings, the gender ISA gap has almost doubled in a decade to around £3,000,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.
“Women hold 52 per cent of the UK’s ISAs, but they’re hampered by the fact so much of it is in cash.
“They also underestimate the risk their cash ISA will lose value after inflation. With the best easy access ISA without restrictions currently paying 0.66 per cent, and inflation running at 5.5 per cent, this is a racing certainty.”
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