Ethnic minorities are significantly less likely than white Britons to save money in a pension plan, placing millions of people in danger of facing financial trouble in old age, according to research from the Social Market Foundation (SMF) think tank.
The SMF study found major differences between how white people and ethnic minorities plan and save for the future. This is based on a survey of ethnic minorities in the UK, in-depth interviews with customers, and official data from the Financial Conduct Authority.
The research discovered that only 25% of workers from racial or ethnic minorities have a job pension, far less than the national average of 38%.
The SMF also found that ethnic minorities are more doubtful than others about the benefits of private pension savings in a study funded by the consumer organisation Which?.
According to the SMF, ethnic minorities in the UK may be at “greater risk of hardship in old age as the state pension and their savings may turn out to be insufficient for their needs” due to this combination of doubt about private pensions and confidence in public supply.
Additionally, ethnic minorities are more likely than others to think that a comfortable retirement will be possible with just the state pension.
SMF researcher Niamh O Regan said: “Longer lives and rising costs mean that building a solid private pension is a necessity for just about anyone who wants a comfortable retirement. Too many people from ethnic minorities are at risk of hardship in later life because they’re not saving into a pension and putting too much faith in the state pension.”
The SMF said that in order to solve the issue, ministers should change the pension auto-enrolment rules in order to enrol more people – many of whom are members of ethnic minorities – into the occupational pension system. Workers from ethnic minorities are frequently excluded from workplace pensions because they are more likely to earn low earnings.
SMF research director Aveek Bhattacharya said: “Sensible changes to pensions auto-enrolment rules would bring more ethnic minorities into pension saving, increasing their chances of enjoying the comfortable retirement that everyone deserves.”
The think tank urged the financial services sector to do more to increase the trust of racial and ethnic minorities in pensions and savings products.
Social Market Foundation researcher Gideon Salutin added: “Pensions and savings companies can discharge their duty to consumers and to wider society by doing more to demonstrate to Britain’s ethnic minorities the benefits of workplace pensions. This research should be a wake-up call to the pensions and savings industry to improve the way it talks to ethnic minorities in the UK. Many of them just don’t see the value in investing in conventional pension and savings products, putting some of them at risk of worse financial futures.”