Wealth inequality by gender.

 

The total wealth held by all private households in Great Britain amounted to £14.6 trillion as of 2014-16. Of this, the great majority comes from private pensions (42%) and net property wealth (35%). A much smaller proportion comes from net financial assets (15%) and physical assets (9%) [1].

 

At an individual level, women hold much less pension wealth than men – approximately one-fifth of men’s for women aged 65 [2]. According to the UK Women’s Budget Group, the main reason for the gender gap in pensions is private pension schemes, promoted and subsidised by successive governments, which disadvantage women since they favour those with continuous full-time employment and high lifetime earnings – women are more likely to take breaks from work and earn less. As of 2012-14, roughly three-quarters of men but just half of women aged 65+ had a private pension [3]. In the same period, 37% of men aged 16+ contributed to a private pension compared to 32% of women, with the median value of men’s total pension wealth nearly twice as high as women’s (£76,900 vs £41,700 respectively). Gender inequality in pension wealth become more pronounced with age, which could be attributable to differing career paths [4].

 

Excluding pensions and property, women still lag behind men – according to a report by the EIS Association, women in Britain have, on average, £43,000 in investable assets compared to £75,000 for men [5]. Measuring identified personal wealth – the valuation of estates passing on death that require a grant of representation – finds that the average net estate size is £272,117 for men and £246,423 for women [6].

 

Women are more likely to be in poverty than men – 5.2 million women are in poverty in the UK compared with 4.7 million men – and women with children are especially likely to be in poverty (28% of women with children in poverty vs. 18% of women without children) [7]. This is contributed to by the fact that young women are more likely to not be in employment, education, or training – often because they are caring for others [8].

 

The fact that a lot wealth is measured at a household level, aggregating together individual and shared wealth of both men and women, makes it quite difficult to estimate the gender wealth gap in a number of areas. Men’s control of household finances is a problem for many women – financial dependence can make it harder for women to leave households, important if domestic abuse is occurring (financial control is itself defined as abusive) [9], and could mean women are individually poor even if part of a wealthy household.

 

Marriage is for the rich.

 

Some of the tax benefits that can be utilised by couples include:

• Not having to pay Inheritance Tax on anything left by a spouse/civil partner [10].

• Being able to pass on about one-tenth of the Income Tax Personal Allowance to a partner (This is restricted to relatively low-income couples: one partner must be taxed at the Basic Rate and the other under the Personal Allowance) [11]. Income tax can also be avoided by passing income between partners, e.g., the lower-income partner holding the couple’s savings to reduce tax on income from interest [12].

• Gifts to a spouse/civil partner are exempt from capital gains tax (unless the couple is separated and not living together) [13]. This enables couples to maximise the use of their Capital Gains tax-free allowance – if one partner is set to make gains that would take them above the allowance, and the other is below the allowance, they can freely transfer assets between themselves to avoid tax.

 

Meanwhile, Universal Credit pays less generously to couples than it does to single individuals: the Monthly standard allowance for a single person aged 25+ is £334.91, whereas for a couple of whom at least one is aged 25+ it is £525.72 for the pair [14]. This is an increase of just 56%; a couple claiming jointly lose out on £144.10/month compared to if they were able to each claim separately and then combine their incomes. Permanent relationships can, therefore, penalise those on low incomes and who have little to no wealth.

 

For the purpose of benefits and tax credits, the Department for Work and Pensions counts 2 people as being in a couple if they live in the same household and are married to each other, in a civil partnership with each other, or just “living together as if they were married” [15]. Compare this to the rules for Capital Gains Tax, which allows a married couple to make tax-free gifts to each other as long as they have been living together for at least part of the financial year, even if they are mostly separated [16].

 

A 2013 study by the Marriage Foundation estimated that 240,000 couples with children pretended to live apart in order to claim lone parent benefits and tax credits, based on noting a discrepancy between the ONS-reported number of single parent households and the HMRC-reported number of lone parent tax credit beneficiaries. Up-to-date numbers would be difficult to find given the gradual changes to the benefits and tax credits system with the introduction of Universal Credit.

 

The overall picture is clearly inconsistent and inequitable: couples receive tax breaks which benefit the well-off but if they are struggling to subsist and in receipt of state benefits they are penalised for being together. Wealthy couples are better off it they act as if they live together even if they are really separated, and the loose standards and definitions applied help them to do so, while poorer couples have a strong incentive to act as if they are separated even if they are not so that they can make separate claims, potentially damaging their relationship and family.

 

Taxation and subsidies should relate to individuals.

 

The state should not be in the business incentivising and penalising different forms of family life. Tax reliefs and benefits ought to be applied on an individual basis rather than alternately privileging and punishing cohabitation and marriage. Many couples will nevertheless wish to consolidate their finances and file their taxes and claims jointly and the possibility of doing this could be preserved, however it should be a voluntary decision rather than presumed by the government and should not result in any unfair advantage or disadvantage or enable abusive control by one partner.

 

Difficulties with such a system would most likely come with situations like where a couple has a child – they would together warrant an increased level of benefit in order to provide for the child (or children). However, if a child benefit was paid to both parents this would advantage couples over single parents, which would not necessarily seem fair. The most reasonable solution in an individualised system is probably to give couples the option of one receiving the whole child benefit or it being split equally between them.

 

Both the Labour Party and the Liberal Democrats proposed scrapping the marriage tax allowance, which allows spouses to transfer some of their Personal Allowance between each other, in their 2019 General Election manifestos [17].

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1https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/totalwealthingreatbritain/april2016tomarch2018

2https://www.ftadviser.com/pensions/2018/10/24/women-have-one-fifth-of-men-s-pension-wealth/

3https://wbg.org.uk/wp-content/uploads/2017/11/pensions-pre-budget-nov-2017-final.pdf

4https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/compendium/wealthingreatbritainwave4/2012to2014/chapter6privatepensionwealthwealthingreatbritain2012to2014#total-wealth-held-in-private-pensions-individual-level

5https://uk.finance.yahoo.com/news/one-stat-reinforces-extent-wealth-inequality-men-women-111434507.html

6https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/556615/Table13-2.pdf

7https://www.jrf.org.uk/blog/iwd2018-time-loosen-grip-poverty-women-uk

8https://www.spi.ox.ac.uk/sites/default/files/ Gender_and_poverty_Bennett_and_Daly_final_12_5_14_28_5_14.pdf

9https://www.bbc.co.uk/news/business-32430816

10https://www.gov.uk/inheritance-tax

11https://www.gov.uk/marriage-allowance

12https://www.telegraph.co.uk/finance/personalfinance/money-saving-tips/10162608/Why-getting-married-leaves-you-better-off.html

13https://www.gov.uk/capital-gains-tax/gifts

14https://www.gov.uk/universal-credit/what-youll-get

15https://www.gov.uk/government/publications/universal-credit-and-couples-an-introduction/universal-credit-further-information-for-couples

16https://www.gov.uk/capital-gains-tax/gifts

17https://www.telegraph.co.uk/tax/news/married-couples-face-250-hit-liberal-democrat-tax-plans/