Pension pot 'gap' sees millions missing out on £62,000
A person from an ethnic minority has a pension pot less than half the size of an average white British saver, new data has found
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A person from an ethnic minority has a pension pot less than half the size of an average white British saver, new data has found.
The huge ethnicity pension gap has revealed that some people could be missing out on £62,000.
According to research by Legal & General’s investment arm, the average white British saver has a pension pot of £114,941, compared to the average saver from a minority ethnic background who has a pension pot of £52,333.
It blamed the “ethnicity pensions gap” on “misconceptions” around pensions and a “significant distrust of employers”.
Researchers blamed the 'ethnicity pensions gap' on 'misconceptions' around pensions and a 'significant distrust of employers'
Rita Butler-Jones, head of DC (defined contribution) at LGIM, said: “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.”
More than 4,000 UK adults were surveyed, while interviews with six focus groups to explore key areas were also carried out.
According to 20 per cent of the respondents from a minority ethnic background, the cost of living crisis has been preventing them from paying into a pension.
While just 13 per cent of white British people who were surveyed said the cost of living crisis was affecting their pension pot.
“The perception of pension instability appears [to be] due to an underlying concern that the very structure of pensions is corruptible,” said LGIM.
Figures show 25 per cent of people from minority ethnic backgrounds had a workplace pension.
The research found people in this group were “more sceptical than others about the value of private pension savings”.
Just 13 per cent of white British people who were surveyed said the cost of living crisis was affecting their pension pot
PAThe report also found there appeared to be “a lack of trust and even fear about workplace pensions,” with more than a quarter of those from minority ethnic backgrounds “not wanting to take a risk with their money”.
This compared to seven per cent for their white British counterparts.
LGIM has recommended a number of steps to close the ethnicity pensions gap, including going further on extending the UK’s workplace pensions “auto-enrolment” scheme so that it is better suited for those on lower incomes or with multiple jobs.