People from ethnic minority groups are much less likely than white Britons to have a workplace pension, potentially putting them at risk of financial hardship when they retire.
The Social Market Foundation (SMF) think-tank has called for pensions auto-enrolment to be reformed to encourage more low-income workers to save for retirement, after finding that only 25% of ethnic minority workers have a workplace pension.
Take-up among non-white British ethnic groups was well below the national average of 38%. Analysis of broad ethnic groups found that 23% of black and 25% of Asian respondents had a private or workplace pension, but there were significant differences in pension take-up within these groups. For example, only 7% of Bangladeshi people had a pension, compared with 42% of Chinese respondents.
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The SMF’s Squeezed out or opting out? report finds that not having enough money to spare was the most common reason individuals gave for not having a pension, however ethnic minorities were less likely to say this. Twenty-five per cent of respondents without a pension said they did not have enough money to spare, but among ethnic minorities this fell to 20%.
Other reasons people gave for not having a pension included thinking the state pension would be enough for them (16% of ethnic minority respondents), having enough money in other savings (14%), a lack of interest in a private pension (13%) and plans to retire abroad (11%).
The survey also found that:
- Among ethnic minority workers with household earnings between £30,000 and £60,000, only 22% have private pensions, less than half the 48% rate for the whole population with similar earnings
- 13% of ethnic minorities without a pension are not interested in having one, compared to 9% of the general population
- 4% of the total sample said they did not know whether their employer offered a workplace pension. This figure was around the same across all ethnic groups.
One Asian man in his 30s told researchers: “If I change jobs, and they had a very good pension scheme, then I would, I would probably go for it. But I guess I’m sort of a little bit undecided on what would be the best sort of pension scheme for me at the moment.”
Some respondents in their 50s told the SMF that they did not understand how pensions worked, with one stating that she had not considered opening one as she viewed retirement as “a while away”.
Aveek Bhattacharya, research director at Social Market Foundation, 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 SMF noted that the government’s 2017 review of pensions auto-enrolment recommended lowering the age of eligibility from 22 to 18, but this has not yet been implemented.
It added that reform of pensions auto-enrolment should also look at the earnings threshold for eligibility. The current earnings threshold is £10,000, but the SMF would like to see this lowered to £0.
“We back this proposal, but would like see it go a step further, with employers contributing from the first pound, without needing the employee to contribute simultaneously,” the report says.
“Not requiring employees to contribute initially could help to build the pension pots of even the lowest earners, without any change to their monthly disposable income. Employee contributions could then kick in once an employee starts earning over a certain amount, such as the point of national insurance contribution. It is likely that these measures would result in greater pension participation among ethnic minority consumers, particularly ethnic minority women who have the lowest pension contribution rates but have also benefited greatly from auto-enrolment up to this point.”