Pride Month is a time for celebrating the LGBTQ+ community and shining a light on areas that are often overlooked – such as how sexual orientation or gender identity interacts with a person’s ability to thrive financially.
While everyone grapples with money and no one finds it easy to increase their pay, build a decent retirement fund or reach their financial goals, LGBTQ+ people can face additional barriers.
That is not to say that all LGBTQ+ people are worse off or face the same issues. It does mean it is important to recognise that, despite all the progress that’s been made for LGBTQ+ equity and inclusion, even today life paths that differ from “the norm” and the impact of discrimination in the past or present all come with a cost.
In other ways, being LGBTQ+ just means having additional things to consider when it comes to financial planning.
Here are some of the factors that may affect an LGBTQ+ person’s finances.
The data gap
It is difficult to build a full picture of how being LGBTQ+ affects a person financially because population data has typically been gathered using traditional definitions of “male”, “female”, “husband” and “wife”. What we know about people’s earnings, tax, pensions, credit scores, mortgages – virtually every aspect of money – is based on this assumption of a gender binary.
There is increasing recognition these data models don’t tell the full story and things are changing – for example, the Census asked about gender identity and sexual orientation for the first time in 2021 – but it will take time before the data gap is bridged.
Academic studies from around the world are filling part of the data gap. Some findings include:
- Women in same-sex relationships may experience a double penalty from the gender pay gap
- Additional costs involved in gender-affirming care
- Lack of financial support from disapproving family
- Higher costs involved in starting a family
Property premium
Living in a neighbourhood where they’ll feel safe and supported by others like them is important for many LGBTQ+ people. But renting or buying a home in one of the big LGBTQ+ communities in Manchester, Brighton or London can cost significantly more than elsewhere. Even within those cities, a person who identifies as LGBTQ+ will still probably have to spend more to be able to buy or rent in an area that feels progressive and accepting.
It takes a national average of 5.7 years for a first-time buyer to save a deposit with the help of the Lifetime ISA, research from digital wealth manager Nutmeg has found. But for a first home in Brighton it would take 8.8 years and in London it would be 10.8 years.
Higher property prices in these areas can be a factor when it comes to retirement planning, as homeowners often downsize to a smaller property in a cheaper area when they are older, to release equity from their home which they live off in retirement. Someone who is LGBTQ+ may be less willing to move away from the community or feel they have fewer choices about where to live. This underscores why it is so important to have pension savings, rather than relying on property wealth for retirement.
Workplace stress
Despite all the progress made for LGBTQ+ equality, discrimination persists. Studies have found gay men and lesbian women are less likely to be invited for a job interview, are offered lower salaries and earn less than their straight colleagues.
It’s still not easy to be “out” in the workplace. Sometimes people “go back in the closet” when they change job, if they sense the environment is not safe. Stress from the ongoing effort of modifying behaviour to fit in at work, changing a partner’s pronouns or dodging the topic during office chats about family or holiday plans can take its toll and people in this situation are less likely to stay in their job.
The flipside is that many employers value the benefits of a diverse workforce. LGBTQ+ people’s careers can thrive even more when they find an inclusive organisation with the right cultural fit.
Hangover from history
Campaigners have successfully challenged historical discriminatory policies in all areas of life, including financial services. For example, until rules were changed in 1994, insurers would ask customers if they had ever taken a HIV test in the assumption that testing was an indicator of someone having a “riskier” lifestyle.
In the past, pension providers did not recognise same-sex partners when it came to “survivor benefits’” This meant that when a straight person died their remaining pension went to their opposite-sex partner, but when someone in a same-sex relationship died their pension went with them. Since 2017 same-sex couples have had the same rights – not very long ago.
While laws and social norms have changed, it is understandable that some LGBTQ+ individuals might have bitter memories or continue to feel alienated by industries that did not support them.
There is still work that needs to be done and things are far from perfect, but banks, investment managers, financial advisers and pension providers are trying harder to ‘speak’ to LGBTQ+ customers.
Tweaks to policies such as using customers’ preferred pronouns or offering gender-neutral titles may be small ways of showing respect towards different identities, but over time their impact could be much bigger.
By knowing who their customers really are, companies can help with financial inclusion, close the data gap and create services tailored to the individual, regardless of someone’s sexual orientation or gender identity.
Annabelle Williams is a personal finance specialist at Nutmeg
