Black and Asian people are less likely than white Britons to save into a pension scheme, risking financial instability for millions in their old age, a think-tank has warned while urging ministers to act.
The Social Market Foundation (SMF) think-tank found that just 25 per cent of people from ethnic minorities have a workplace pension, which is below the national rate of 38 per cent.
In research supported by the consumer group Which?, the SMF found that ethnic minorities are more sceptical than others about the value of private pension savings and are more likely to believe that the state pension will be enough to provide a comfortable retirement.
Gideon Salutin, researcher at Social Market Foundation, said: “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.
“This 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.
“Many of them just don’t see the value in investing in conventional pension and savings products, putting some of them at risk of worse financial futures.”
The SMF said this combination of scepticism about private pensions and faith in public provision may put 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.”
Ministers should overhaul pensions auto-enrolment rules to bring more people – including many from ethnic minorities – into the workplace pension system, the think-tank has recommended.
The think-tank also challenged the financial services industry to do more to build ethnic minorities’ trust in pensions and savings products.
Based on a survey of ethnic minorities in the UK, in-depth interviews with consumers and official data from the Financial Conduct Authority, the SMF research reveals significant disparities in the way ethnic minorities and white people plan and save for the future.
The financial services industry should also do more to build awareness of and trust in its products among ethnic minority consumers, the SMF said.
“Our own survey for this report suggests that across pensions, savings and financial advice, as well as some insurance products, this may be a greater issue for ethnic minorities, who are more likely than the general population to cite lack of awareness as a reason for not taking out a particular financial product.
“Part of the responsibility for addressing this situation should lie with government, but it is also incumbent on financial firms to their bit as well.”
Evidence shows racial disparities across the wages of Black, Asian and minority ethnic workers. As workers are more likely to be on low wages, they are often currently excluded from workplace pensions.
Months ago, a Conservative MP has blasted her own government for its “lack of will” to tackle racial disparities in the workplace after ministers refused to introduce mandatory ethnicity pay gap reporting.
The government has been approached for comment.