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Women overinvesting in Cash ISAs face low long-term returns

The research by Schroders studied the attitudes to risk of 23,000 people and found that women aged from 18 to 34 were much more likely than any other group to be influenced by others when making a financial or investment decision. Women continue to overinvest in Cash ISAs, with the gender gap between the number of men and women holding these products failing to narrow over the last five years, says Bowmore Wealth Group, the integrated wealth manager.

Latest HMRC data shows women represented over half of all Cash ISA holders last year*, at 55% (3.59m) of the total (6.47m). Men held 45% (2.88m) of Cash ISAs last year. In each of the last five years, women have always represented more than half of all Cash ISA holders.

This overinvesting in Cash ISAs by women means they are overexposed to the negative real returns (i.e. after inflation) these products offer.

Bowmore Financial Planning, which is part of Bowmore Wealth Group, says cash has historically underperformed as an asset class over the medium and long term and this could continue. Interest rates in the UK will likely remain at their record lows for years in order to help drive an economic recovery post-coronavirus.

Cash has delivered average annual returns of 4.9% since 1925, lagging behind global bonds (6.6%), rental property (7.2%), gold (7.7%) and UK equities (12.4%)**.

Research*** suggests that women often perceive themselves to be less knowledgeable about investing and less confident when making investment decisions than men which translates into a desire for lower risk investments, such as Cash ISAs.

Separate research has also suggested that women are more likely to consult with other women before making a financial or investment decision. This can create a self-reinforcing cycle if those other women consulted also do not hold higher risk investments.

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