Phoenix Group’s longevity think tank, Phoenix Insights, is calling on industry leaders to think about how they communicate and engage with ethnic minority groups as customers so they can better understand the causes of, and potential solutions to, an apparent retirement funding gap in many communities.
New research from the think tank, involving analysis of Phoenix Insights’ Longer Lives Index* data, shows that pension participation among ethnic minorities is lower than average, and non-pension sources are expected to play an important role in funding the retirement of these groups.
Compared to the average retirement income of £25,000 expected by white British people, most ethnic minority groups expect to have a retirement income around 16% higher if they were of a similar age and had similar salaries.
The percentage of people from these groups expecting a “comfortable” retirement is also greater, at 38% of people from Black African, 37% of people from Indian or Pakistani and 36% of people from Bangladeshi ethnic backgrounds, compared to 25% among White British people.”
However, these expectations do not reflect the present reality in which weekly income for retired Asian and black families are £391 and £412 respectively, compared to the population average of £556.
With retirement income typically depending on the number of years a person has saved for and how many years of retirement need to be financed, the finding that individuals from ethnic minority groups also aim to retire up to two years earlier suggests additional limitations on the size of the savings pot these groups will be entering retirement with.
That said, Phoenix Insights’ research also found that people from Pakistani, Bangladeshi and Indian ethnic backgrounds were more likely to rely financially on support networks, such as friends and family, in retirement, than white British people. Furthermore, property wealth is also more likely expected to be drawn upon by most ethnic minority groups than for white British people, reflecting differences in cultural norms and family structures.
While non-pension sources can contribute to overall retirement income, according to this latest analysis, the amount of money an individual has saved in a pension is the main contributor to a good standard of living in retirement which is why Phoenix Insights is urging the pensions industry to do more to understand and respond to the different attitudes and expectations of different ethnic minority groups.
Catherine Foot, Director of Phoenix Insights said:
Across the UK, we know that there are up to 18 million people who are under-saving for retirement. Tackling this problem should be an urgent priority for government, employers, and individuals alike, as the nation is living longer than ever before.
However, by taking a big picture view, we can be at risk of missing the nuanced challenges faced by different groups within society, which is why Phoenix Insights has chosen to take a deeper dive into how different ethnic minority groups are preparing for retirement.
Our findings are clear that ethnic minority groups do indeed have different expectations and levels of preparation for retirement, whilst at the same time demonstrating the need to better understand how providers and government can support these groups so they can enjoy a good quality retirement that meets their financial needs.