According to data, a person in the UK who is part of a minority ethnic group typically has a pension fund that is less than half the amount of the average white British saver.
According to a study by Legal & General’s investing division, there is a notable disparity in pension savings among different ethnic groups in the UK. This issue is exacerbated by misunderstandings about pensions, a lack of trust in employers, and limited disposable income.
According to the researchers, individuals from minority ethnic backgrounds have an average pension fund of £52,333, which is significantly lower than the average of £114,941 for white British savers.
Over 4,000 adults in the UK were surveyed, and six focus groups were interviewed to examine important aspects. This study is considered one of the largest research projects on this topic, according to Legal & General Investment Management (LGIM), which oversees £1.2tn in investments and pension funds.
The business stated that the difference in pension rates among ethnic groups is driven by various interconnected economic, social, and educational factors.
The main reason identified was a shortage of available funds: individuals from minority ethnic groups were more prone to having lower incomes. Around 20% of minority ethnic respondents reported that the financial strain of living expenses hindered their ability to contribute to a pension plan. In comparison, only 13% of white British respondents cited this issue.
According to the report, there seems to be a lack of trust and fear surrounding workplace pensions. Among individuals from minority ethnic backgrounds, 26% expressed reluctance to take a financial risk, while only 7% of their white British counterparts shared this sentiment.
LGIM stated that the perception of pension insecurity may stem from a worry that the fundamental design of pensions is susceptible to corruption.
Many people are afraid that their employer will not give them their pension, so they prefer to have cash or property instead. This is especially true for minority ethnic individuals.
In comparison, individuals from minority ethnicities who were saving for retirement tended to have more trust in the government, community, and religious institutions for financial advice compared to white British respondents.
The recent LGIM report revealed that individuals from minority ethnic groups are significantly less inclined to contribute to a pension, according to previous research conducted by the Social Market Foundation thinktank.
In February it said only 25% of people from minority ethnic backgrounds had a workplace pension, well below the national rate of 38%, and that people in this group were “more sceptical than others about the value of private pension savings”.
LGIM has suggested several measures to address the disparity in pension coverage based on ethnicity. These include expanding the UK’s automatic workplace pension enrollment system to better accommodate individuals with lower incomes or multiple jobs.
According to Rita Butler-Jones, the leader of DC (defined contribution) at LGIM, the instability of recent years has worsened disparities in finances, social status, and health within British society.
The speaker stated that they are starting to comprehend the reasons behind the discrepancy in pensions based on ethnicity. However, it is evident that the factors contributing to this gap, such as salary disparities, lack of awareness and understanding, perceived insignificance of pensions, and societal expectations, have been worsened by the impact of Covid, rising cost of living, and ongoing challenges for women in regards to the gender pensions gap.