LGIM - Just don't mention the pension: the ethnicity pensions gap DC, DC-workplace, UK, 2023

What did we discover?

Just don’t mention the pension: the ethnicity pensions gap

Taking action today for a brighter tomorrow

There is a large ethnicity pensions gap – 54%, to be exact. The gap exists just as much in people’s minds, in views about the relevance of pensions to people’s lives after they retire. We are only beginning to understand the causes. However, some of the key factors affecting the gap – pay levels, lack of familiarity and pensions knowledge and expectations of the state’s role – have been added to by instabilities caused by COVID, the cost-of-living crisis and the challenges linked to the ‘gender pensions’ gap. While the gap may feel disheartening, pensions uptake is increasing over time, and younger generations are more and more aware of the benefits of this savings vehicle. Waiting years for a generational shift is not an option. Better communication, more adaptable ways of paying pensions and focused policy decisions will mean that the challenges minority ethnicities face in building their retirement pots are tackled sooner rather than later. It’s up to all of us to turn that promise into the reality of a better retirement future for everyone.

The last few years have made saving for retirement harder

Some people from minority backgrounds see pensions as riskier than other options

People are worried about their financial futures

Women and carers are particularly vulnerable

What can we do to help?

On average, people from minority ethnic backgrounds in Britain have less in their pensions

One example could be employers continuing to pay pensions during maternity leave.

We can make sure career breaks don’t mean contributions breaks

Seven in 10 (69%) would like it to be easier to sign up, and using apps and a fully online experience is popular. This shows that accessibility is important to engaging pension savers.

We can adapt pensions to people’s changing situations using technology

27% of those from minority backgrounds who added to their pension payments over the last year did so because they are more worried about the future. We were pleased to see the government support lowering the age from 22 to 18 in a proposed law. This also laid the groundwork for removing the lower earnings limit that allows companies to make no pension contributions on the first £6,240 of an employee’s earning.

We can try to give lower earners a fairer deal

One of the advice industry’s biggest challenges is the ‘trust gap’, where people don’t want to trust banks and financial institutions with their money by saving and investing. Since nearly half (48%) of the minority ethnic people in our survey say they take financial advice from friends and family, we found that almost as important as what is said, is who is saying it. Many people from minority backgrounds said their children were encouraging them to learn more about pensions. We heard that when it comes to formal advice, it’s better coming from a trusted face, or someone minority groups can empathise with more. Perhaps, setting up informal partnerships with official sources of information may help start conversations about financial health. These partnerships can be delivered through community groups or by using the media and social media that people engage with every day. However, advice could also be given in a more professional setting: nearly three in 10 (27%) of those from minority ethnic backgrounds take financial advice from their bank.

We can think outside the box with financial advice

71% of minority ethnic people in the survey want their pension provider to help them understand more about the companies and industries their pension is invested in. It’s clear that pensions knowledge is power. In the past year, nearly one fifth (19%) of minority ethnic people who answered our survey have increased payments into their pension pot. Over one in five (21%) of this group took this step because they ‘understand pensions better’, demonstrating the importance of clear communication. What does this mean in practice? Interviewees told us that they find infographics and examples of how pensions work engaging. Getting rid of some of the pervasive and damaging pensions myths calls for careful messaging. Once pensions are framed in terms of ‘free money from your employer’ it makes them a ‘no brainer’ for study participants.

We can help people get better information about their pensions

Over half of those people from minority backgrounds say the pandemic impacted their finances, versus 37% of white British people.

Nearly four times as many people from a minority ethnic background say what is stopping them paying into their pension is that they don’t want to take a risk with their money. Some perceive pensions as riskier than alternatives such as cash and property.

Some people from minority backgrounds see pensions as riskier than other options

Around half of our total group of respondents worry about not having enough in retirement. However, 43% of people from minority ethnic backgrounds think they may have to spend their pension savings early to support themselves, compared with 34% of white British people.

People are worried about their financial futures

Those from minority ethnic backgrounds are more likely to have unpaid caring responsibilities. Nearly half (47%) of minority ethnic respondents have taken time away from paid work to fulfil caring duties, such as maternity leave. Of these, 35% and their employers did not pay into their pensions during this time. These figures are higher than for white British respondents (41% in unpaid caring roles with 30% of these taking contribution breaks). As caring responsibilities tend to fall to women, this also adds to the gender pension gap.

Women and carers are particularly vulnerable

In the fields of education, government (or state) provision and at work, we’ve seen moves towards helping people of all ethnic backgrounds achieve equal outcomes, as well as equal chances. Now, the conversation has moved on to include pension investing. In a survey of over 4,000 pension savers, we decided to delve deeper into the issue of ethnic inequality in retirement savings.We looked at the size and causes of today’s ethnicity pensions gap and what employers, the government and pension providers can do to help.

The instability of the past few years has brought the UK’s existing financial, social and health inequalities to the front of people’s minds. The media, government and general public are paying greater attention to who faces different impacts. Minority ethnicities, people who belong to an ethnic, religious or language-speaking group of people that makes up less than half of the population of the UK, are often at the centre of this discussion.

Introduction

How did we do it

What did we discover?

What can we do to help?

Taking action today

Introduction

At £52,333, the average minority ethnic person’s pension pot is less than half the size of the average white British person’s £114,941*. Meanwhile, nearly seven in 10 of minority people in our survey have no pension pot at all.

*This optional question had the following sample size: white British – 404, minority ethnicities – 303

On average, people from minority ethnic backgrounds in Britain have less in their pensions

of minority ethnic people have no pension pot at all.

Ethnic minorities £52,333

White British £114,941

The last few years have made saving for retirement harder

>50

Click here for more information on how we did it.

Ethnic minorities

White British

of all surveyed worry about not having enough...

Around

of minority ethnic people in unpaid caring roles with 35% of these not paying into their pensions

100

of white British people in unpaid caring roles with 30% of these not paying into their pensions

100

Ethnic minorities

White British

Introduction

What did we discover?

What can we do to help?

Taking action today for a brighter tomorrow

How did we do it

Disclaimer

In the fields of education, government (or state) provision and at work, we’ve seen moves towards helping people of all ethnic backgrounds achieve equal outcomes, aswell as equal chances. Now, the conversation has moved on to include pension investing. In a survey of over 4,000 pension savers, we decided to delve deeper into the issue of ethnic inequality in retirement savings. We looked at the size and causes of today’s ethnicity pensions gap and what employers, the government and pension providers can do to help.

Intended for members of defined contribution pension schemes. Capital at risk.

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Disclaimer

*This optional question had the following sample size: white British – 404, minority ethnicities – 303

On average, people from minority ethnic backgrounds in Britain have less in their pensions

of minority ethnic people have no pension pot at all.

Ethnic minorities £52,333

White British £114,941

Over half of those people from minority backgrounds say the pandemic impacted their finances, versus 37% of white British people.

The last few years have made saving for retirement harder

>50

Ethnic minorities

White British

Some people from minority backgrounds see pensions as riskier than other options

People are worried about their financial futures

Ethnic minorities

White British

of all surveyed worry about not having enough...

Around

Women and carers are particularly vulnerable

of white British people in unpaid caring roles with 30% of these not paying into their pensions

100

of minority ethnic people in unpaid caring roles with 35% of these not paying into their pensions

100

We joined forces with Humankind Research and Tapestry Research to conduct a 20-minute online survey among 2,018 nationally representative UK adults (a group which reflects the population as a whole) with limits set on age, gender, location and ethnicity. Minority ethnicity participants included both British and non-British nationals. We then included an extra 2,000 additional minority ethnic respondents:

How did we do it?

Disclaimer

Back

Asian or Asian British (Indian, Pakistani, Bangladeshi, Chinese, Other Asian background), Black, Black British, Caribbean or African (Caribbean, African, Other Black background), White (White British (English, Scottish, Northern Irish, Welsh or British), Irish, Gypsy or Irish Traveller, Roma, Any other white background), Mixed or multiple ethnic groups (White and Black Caribbean, White and Black African, White and Indian, White and Pakistani, White and Bangladeshi, White and Chinese, White and other Asian background, Other mixed or multiple ethnicity background), Other ethnic group (Arab, Any other ethnic group) Surveying more people meant we could get more detailed and accurate findings from minority ethnic participants, given the relatively low amount of the relevant ethnicities in a nationally representative sample of the UK. We added an even larger amount of people from some groups. For example, given the large number of people of Polish background living in the UK, we included a larger population of this group We attained a robust base of each ethnicity in isolation (minimum 100 in each of the detailed groups) The data was the weighted at a higher level (Black, Asian, mixed) to represent the census proportions of each group We made the decision to add together our survey findings from each of our minority ethnic groups into just one group, to provide a clearer picture of the broad gap between white British people and minority ethnic groups within this country Our approach gave us a larger amount of survey data, as many individual minority ethnic groups could not be reflected at a statistically significant level (when results can’t be explained by chance alone) Rather than surveying a single ‘white’ group, surveying ‘white British people’ alongside other white groups means that white groups whose experiences may largely differ from those of white British people have their views taken on board. Asking for more detail about some of the main areas we found in the survey, researchers held six 90-minute focus groups with 30 to 50-year-olds from the following ethnic groups: Black Africans, Black Caribbeans, Polish, Chinese, South Asian Females, South Asian Males Interviewees came from different locations across the UK. All were aged 30 to 50 and had lived in the UK for at least two years All were employed, with a mix of employment types. None were self-employed or unemployed There was a mixture of those with and without a pension Our researchers aimed to have 50% in each group earning between £6,240 and £10,000 per year (per job). The other 50% earned no more than £50,000 annually Everyone in the survey paid in less than 10% of their salaries into their pensions per year (if they had a pension at all)

Our research took place between November 2022 and December 2022 In line with data from the UK Office of National Statistics, participants came from the following backgrounds, as included in the 2021 UK census: Asian or Asian British (Indian, Pakistani, Bangladeshi, Chinese, Other Asian background), Black, Black British, Caribbean or African (Caribbean, African, Other Black background), White (White British (English, Scottish, Northern Irish, Welsh or British), Irish, Gypsy or Irish Traveller, Roma, Any other white background), Mixed or multiple ethnic groups (White and Black Caribbean, White and Black African, White and Indian, White and Pakistani, White and Bangladeshi, White and Chinese, White and other Asian background, Other mixed or multiple ethnicity background), Other ethnic group (Arab, Any other ethnic group) Surveying more people meant we could get more detailed and accurate findings from minority ethnic participants, given the relatively low amount of the relevant ethnicities in a nationally representative sample of the UK. We added an even larger amount of people from some groups. For example, given the large number of people of Polish background living in the UK, we included a larger population of this group We attained a robust base of each ethnicity in isolation (minimum 100 in each of the detailed groups) The data was the weighted at a higher level (Black, Asian, mixed) to represent the census proportions of each group We made the decision to add together our survey findings from each of our minority ethnic groups into just one group, to provide a clearer picture of the broad gap between white British people and minority ethnic groups within this country Our approach gave us a larger amount of survey data, as many individual minority ethnic groups could not be reflected at a statistically significant level (when results can’t be explained by chance alone) Rather than surveying a single ‘white’ group, surveying ‘white British people’ alongside other white groups means that white groups whose experiences may largely differ from those of white British people have their views taken on board. Asking for more detail about some of the main areas we found in the survey, researchers held six 90-minute focus groups with 30 to 50-year-olds from the following ethnic groups: Black Africans, Black Caribbeans, Polish, Chinese, South Asian Females, South Asian Males Interviewees came from different locations across the UK. All were aged 30 to 50 and had lived in the UK for at least two years All were employed, with a mix of employment types. None were self-employed or unemployed There was a mixture of those with and without a pension Our researchers aimed to have 50% in each group earning between £6,240 and £10,000 per year (per job). The other 50% earned no more than £50,000 annually Everyone in the survey paid in less than 10% of their salaries into their pensions per year (if they had a pension at all)

Disclaimer

Back

*This optional question had the following sample size: white British – 404, minority ethnicities – 303

On average, people from minority ethnic backgrounds in Britain have less in their pensions

of minority ethnic people have no pension pot at all.

Ethnic minorities £52,333

White British £114,941

Over half of those people from minority backgrounds say the pandemic impacted their finances, versus 37% of white British people.

The last few years have made saving for retirement harder

>50

Ethnic minorities

White British

Some people from minority backgrounds see pensions as riskier than other options

People are worried about their financial futures

of all surveyed worry about not having enough...

Around

Ethnic minorities

White British

Women and carers are particularly vulnerable

of minority ethnic people in unpaid caring roles with 35% of these not paying into their pensions

100

of white British people in unpaid caring roles with 30% of these not paying into their pensions

100