Dr Priya Khambhaita looks at how studying approaches to retirement planning in the countries where BME groups have family and community links could shed new light on inclusion within UK pensions policy

Ethnic minority groups experience disadvantage and lower incomes as part of the labour-market experience, as well as income inequalities in retirement. People from these groups currently receive lower state pension incomes than the average, although differences have reduced over the last ten years due to pension reforms. Ethnic minorities also have lower levels of private pension saving than the average. These stem from different labour market characteristics as ethnic minority groups are more likely to be low paid, work part-time, take time out for caring, spend time in self-employment or be economically inactive.

While differences in pension income have reduced over the past decade, some black and minority ethnic (BME) groups continue to achieve significantly lower outcomes from private pensions (both savings and income) and are projected to continue doing so into the future. Therefore there is a need to understand what more could be done to reduce BME groups’ risk of being under-pensioned.

There are clear differences between BME groups in the countries from which they have family and community links and the UK in terms of educational opportunities, labour market conditions, and access to information and resources on finance, specifically relating to retirement and pensions. However, there is scope to explore approaches to savings and retirement planning in these countries and studying examples of success. The Pensions Policy Institute is preparing to undertake this research so that lessons can be drawn out for policy design which can help people from diverse cultural backgrounds to achieve better outcomes from long-term saving and avoid amplifying inequalities through policy.

If approaches taken by the state and private pension providers were more attuned to the specific cultural needs of BME groups, they could be more effective in promoting better long-term saving outcomes. This, in turn, could have a positive impact on reducing the risk of people from BME groups living in poverty and having a poor quality of life, both of which are associated with low income in retirement. In addition, the risk of amplifying existing ethnic and socio-economic inequalities with pensions policy could also be reduced.

Current policy approaches may not account for life events having a different quality and occurring at different times for different groups. This is particularly relevant to the specific time points when interventions are most relevant to people’s circumstances and goals, and most likely to lead to behavioural change. Furthermore, some groups may be distinct and be more likely to live in multi-generational households and/or be financially responsible for their parents or siblings.

Whilst the differences in labour-market characteristics which lead to lower private pension incomes cannot be tackled through pensions policy alone, the intention is that this research will enhance understanding of how a more segmented approach could increase chances of achieving better outcomes across different sub-sections of society. The results could feed into the development of new approaches to designing information resources on retirement, pensions and benefits. Greater cultural awareness and consideration could provide a better experience for participants of retirement education programs and users of information and resources.