Pension size of ethnic minorities less than half of white Britons’: research
The disparity is driven by insufficient disposable income, mistrust and risk aversion
ETHNIC minorities in the UK are significantly under-pensioned compared to white British people, according to new research.
Legal & General Investment Management (LGIM) found that at £52,333, the average minority ethnic person’s pension pot was less than half the size of the average white British person’s £114,941.
Insufficient disposable income exacerbated by the cost-of-living crisis, misconceptions and risk aversion drove the ethnicity pension gap, the study comprising more than 4,000 participants revealed.
Some 31 per cent of the ethnic minority respondents said a lack of enough spare income prevented them from investing into a pension, compared to 20 per cent white Britons who cited this as the reason.
A little more than a quarter (26 per cent) of ethnic minority people said they did not want to take risk with their money while just seven per cent of white Britons showed the risk aversion.
Some ethnic minority participants perceived pensions as riskier than alternatives such as cash and property.
Some people feared that the structure of their pension was “corruptible”.
The Covid-19 pandemic and the cost-of-living crisis hit lower-paid ethnic minority respondents harder, the research found.
A fifth of the ethnic minority respondents stated the cost-of-living crisis was preventing them from paying into a pension as against 13 per cent of white British people.
Seven in 10 respondents from ethnic minority backgrounds expressed concern about the elevated interest rates versus six in 10 white Britons.
According to the findings, many missed out on one of the most tax-efficient ways to save for their future due to the “ethnicity pay gap”.
Minority ethnicities were more likely than their white counterparts to trust the media and social media for financial advice. But similar proportions of both groups – 59 per cent of ethnic minorities and 58 per cent of white Britons – said they trusted banks for the purpose.
LGIM’s head of defined contribution, Rita Butler-Jones, said the uncertainty of the past few years had 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 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,” she said.
LGIM research report comes months after the Social Market Foundation think-tank found that people from ethnic minorities were much less likely than white Britons to save into a pension scheme.