Report highlights ethnic minority pension savings gap

Employers need to take more action to bridge the ethnicity pensions savings gap as new research from Legal & General shows people from minority groups are cutting back on their savings more than their white counterparts due to the cost of living crisis.

Savings & Pensions


People from ethnic minorities are nearly twice as likely to be cutting back on their pension payments due to the cost of living crisis than their white British counterparts, according to new research on the ethnicity pension gap.

Legal & General Investment Management’s [LGIM] Ethnicity Pensions Gap Report, based on a survey of 4,000 people, found 20% of minority ethnicities state the cost-of-living crisis is preventing them from paying into a pension, compared with 13% of white British respondents.

The report also found a 54% ethnicity pensions gap, with the average saver from a minority ethnicity background having a pension pot of £52,333, compared with the average white British saver, who has an average pot of £114,941.

It says that, in addition to the cost of living crisis savings gap, the ethnicity pensions gap is driven by multiple structural and interrelated economic, social and educational factors, including:

– A lack of disposable income: according to the research, those from minority ethnicities are more likely to have lower incomes (20% of minority ethnicities vs. 11% of white British respondents), with the risk that many may be falling short of the £10,000 auto-enrolment threshold.

– A lack of pensions knowledge: 18% of minority ethnicity respondents said a lack of pensions knowledge
was the reason they weren’t invested in a pension.

– The compounding effects of gender inequalities: Nearly half (47%) of minority ethnicity respondents have taken time out of work to fulfil caring responsibilities, including maternity leave, versus 41% of white British respondents.

LGIM’s research also reveals that a significant distrust of employers is a contributing barrier to pension saving in the UK. Over a quarter of minority ethnicities (26%) said they didn’t want ‘to take a risk with their money’ versus just 7% of white British counterparts, with people expressing fears that their employer will “keep their money”.

However, while the qualitative research reveals a lack of trust in employers, pension savers among minority ethnicities are on the whole more likely to trust the Government, community and religious centres for financial advice than their white British respondents.

LGIM recommends further progress on auto-enrolment, including the removal of the £10,000 earnings trigger to further support those on lower incomes or with multiple jobs; cross-industry collaboration on pensions inequality; and more action to build trust, including reaching out to minority ethnicity communities to establish informal partnerships and connections to address pensions in the context of financial health and wellbeing.

Rita Butler-Jones, Head of DC at Legal & General Investment Management, said: “The uncertainty of the past few years has exacerbated financial, social and health inequalities across British society. While we are beginning to understand the drivers of the ethnicity pensions gap, it is clear that the factors affecting the gap – including pay levels, lack of familiarity and knowledge, pensions’ perceived lack of relevance, and expectations of the duties and activities of the state – have been compounded by instabilities caused by COVID, the cost-of-living crisis and the continuing challenges for all women associated with the gender pensions gap.

“It has been encouraging in recent years to see some employers and pension schemes trying new methods to engage members with their pension saving and to make information more digestible and accessible. However, the findings of this research are stark and demonstrate that these changes are not cutting through or going far enough. The pensions industry needs to come together to achieve better outcomes for all retirees, irrespective of their background.”

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