The government has faced further calls to introduce auto-enrolment reforms, after research from the Social Market Foundation (SMF) found that 25% of people from ethnic minorities have a workplace pension, compared to a national rate of 38%.

The research, supported by Which, found that ethnic minorities are more sceptical than others about the value of private pension savings on average, and are also more likely to believe that the state pension will be enough to provide a decent retirement.

According to the analysis, just 16% ethnic minority consumers whose household earned under £30,000 a year contribute to a pension, compared to 26% of the general population.

Furthermore, among ethnic minority workers with household earnings between £30,000 and £60,000 a year, only 22% have private pensions, less than half the 48% rate for the whole population with similar earnings.

However, the findings suggested that money isn’t the reason for the gap, as ethnic minorities are less likely to say their pension saving behaviour is driven by cash, with 13% of ethnic minorities without a pension stating that they are not interested in having one, compared to 9% of the general population.

Despite the lower take up, the research also showed that ethnic minorities are slightly more confident of how they plan to fund their retirement, with 63% describing themselves as being confident of having enough money to live on in retirement, compared to 56% of the white population.

However, the SMF warned that the combination of scepticism about private pension and faith in public pension provision could be putting many ethnic minorities in the UK at “greater risk of hardship in old age as the state pension and their savings may turn out to be insufficient for their needs”.

In light of this, it urged the government to “overhaul” pensions auto-enrolment rules to bring more people, including many from ethnic minorities, into the workplace pension system, explaining that as ethnic minority workers are more likely to be on low wages, they are often left out of workplace pensions.

In particular, the SMF urged the government to deliver a reduction in the age of eligibility for auto-enrolled pensions from 22 to 18, as well as look at the earnings threshold for eligibility, suggesting that this should be reviewed and lowered, possibly to zero.

The SMF called for broader changes alongside this, arguing that the financial services industry should do more to build awareness of and trust in its products among ethnic minority consumers, suggesting that the Financial Conduct Authority's new Consumer Duty should act as a “spur” to do more to improve awareness and trust.

Indeed, SMF researcher, Gideon Salutin, argued that the 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”.

“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,” Salutin continued.

Adding to this, SMF director, James Kirkup, stated: “Age and employment patterns are factors in pension take-up, but that’s not a reason for inaction. A better autoenrollment policy is worth doing, and would benefit at least some ethnic minorities in the UK.”

Although the government has remained committed to a mid-2020s timeline for the 2017 auto-enrolment reforms, including plans to potentially lower the earnings limit and reduce the eligible age to 18, it recently rejected calls to outline a timeline for this work, with industry concerns persisting as a result.


This article first appeared on our sister title, Pensions Age.

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