This year's Scottish Widows Retirement Report takes a closer look at how different minority ethnic communities are saving for their retirement - and how they've been impacted by the rising cost of living.

Pete Glancy
Head of Policy, Pensions & Investments
25 October 2022
4 min read

This year’s Scottish Widows Retirement Report looked in detail at the effect that compounding stagnant wage growth and rising living costs was having on people’s retirement preparations. In particular, this year’s report also took a closer look at how different minority ethnic communities were saving for their retirement and how they have been impacted by the current economic environment.  

Who is most affected? 

According to the survey, minority ethnic groups are more concerned about rising living costs compared to those who are in the White British ethnic group. The Pakistani (53%) and the Black (48%) ethnic groups stand out as those being the most worried.  

Some communities  are less likely to have a pension than the White British community. Those surveyed from Pakistani, Indian, Black, Bangladeshi, and other Asian communities that do have a pension are also more likely than the White British participants to be cutting back on their contributions because of the rising cost of living, with the Pakistani respondents appearing to be the most affected. One in five (20%) of Pakistani respondents reported that they’ve had to reduce their pension contributions – nearly double the rate of the White British survey group. 

Minority groups are potentially more vulnerable when it comes to their finances, with the FCA’s Financial Lives survey showing that ethnic minorities are more likely to be characterised as having low financial resilience. The rate among some minority ethnic groups (such as Black and Black British) is over 30%, while among those of White ethnicity it is 19%. The survey indicates that the Pakistani group is particularly vulnerable and is the most likely to cut back on items that indicate a deterioration in financial resilience (35%, compared to 31% of the White British ethnic group).



of Pakistani participants reported that they’ve had to reduce their pension contributions – nearly double the rate of the White British survey group.

How are different communities planning to fund their retirement?

When it comes to savings, the lack of wealth in Pakistani, Indian, Black, Bangladeshi, and other Asian communities already places them at a financial disadvantage. Pakistani employees in particular have one of the highest wage gaps compared with those who are White British. This means that minority community retirement savings are being doubly impacted by the cost of living rise. 

There are significant variations in how different communities expect to fund their retirement. White British survey participants were most likely to rely on a state (58%) or company (36%) pension, while most other ethnic group survey participants were more likely to cite other sources of income or support. For example, 17% of Black, 14% of Indian and 12% of Pakistani participants expected to work as normal through their old age, compared to just 9% of the White British participants. 

Cash savings are most relied on for the Indian survey participants, with 42% expecting to fund their retirement this way. 

Meanwhile, an expected reliance on rental income is also more common amongst Asian communities, favoured by 19% of Indian ethnicity and 17% of Bangladeshi, or other Asian ethnic groups, compared to just 8% of the White British community. 

While support from children and family isn’t cited as a key source of retirement income amongst any of our survey groups, it is a more common contributor amongst the minority ethnic groups we spoke to. While only 2% of the White British ethnic group mentioned family, 8-11% of Pakistani, Indian and Black ethnic groups, and 16% of Bangladeshi or any other Asian group, thought that children or family would contribute to their retirement needs. 

What are the risks of not having a pension?

Our survey showed that Pakistani, Indian, Black, Bangladeshi, and other Asian communities are less likely to be relying on a pension for their retirement than their White British ethnic group counterparts. While diversifying assets and sources of income can be a good thing, there are risks that come with relying too much on cash and cash-like assets to fund retirement, as inflation can end up devaluing those savings in the long term. The rate of non-pension or cash savers is particularly high amongst Pakistani participants (66%), which could leave them particularly vulnerable. 

As mentioned, those from ethnic minority groups who are saving into a pension are also more likely to report cutting back on their contributions as a result of the cost of living increase. This is particularly concerning as most of the Pakistani, Indian, Black, Bangladeshi, and other Asian participants that we surveyed were already more likely to be worried about running out of money during their retirement. 

However, by not paying into a pension, savers risk missing out on the significant benefits of a pension such as tax relief, growth through investment returns (rather than the money sitting in the bank and relying on the interest rate), and compound interest over a longer period of time. Those who are employed and are choosing not to pay into a workplace pension are also not earning their employer contributions, meaning that they are essentially missing out on free money. 

"In order to address the oncoming retirement funding crisis, we need to first tackle the cost of living crisis by getting inflation under control as quickly as possible."


What are we calling for?

This year’s Retirement Report has set out evidence on the huge pressure that the rising cost of living has had on households’ financial position:

  • Deteriorating financial positions will put many households back years in their ability to prepare for the long term. 
  • Others are experiencing the cost of high inflation eroding their savings.

In order to address the oncoming retirement funding crisis, we need to first tackle the cost of living crisis by getting inflation under control as quickly as possible. As an industry, we also need to look at what can be done to support financially vulnerable customers. 

Our report recognises the diversity of experiences and financial challenges faced by people across the UK in their retirement preparations. Addressing some of these challenges will require some radical re-thinking about retirement, so we welcome the proposal of the new Money and Pension Service Retirement Hubs. These will give a more holistic look at retirement accounting not just for pension provisions but also looking at savings, housing equity and benefits that individuals may be entitled to. 

There are also some clear reforms and policy changes that the Government and the wider industry can make to the current pensions systems to help make it easier – and more cost effective – for customers to choose a pension as their main source of retirement income:

  • Lowering the earnings trigger so more people are automatically enrolled - Current commitments from the UK Government to remove earnings thresholds are a first step. These must be followed by further changes over the next decade to increase defaults to at least 12%, and to encourage those who can afford it to save at least 15%. While navigating the cost of living crisis is obviously the current priority, there needs to be a roadmap in place to implement these changes by the early 2030s.
  • Increasing the rate of tax relief - We’d also recommend that the Money Purchase Annual Allowance (the amount that savers can pay in to a pension and still receive tax relief) should be temporarily suspended or increased to £20,000, to allow older groups to dip into their retirement savings if they must without undue curbs on their ability to recover and save into their pension in the future. 
  • Renewing the focus on pensions for the self-employed - The Department of Work and Pensions should also push ahead with work to understand how the self-employed could be better engaged with an ecosystem which achieves the same as Auto Enrolment, but in a way that is compelling for the self-employed.
  • Unfreezing lifetime allowance - Elsewhere, pension allowances should be unfrozen and linked to inflation. The rate of inflation means the real value of the Lifetime Allowance and Annual Allowance are eroding rapidly. Unless changed many will be landed with unfair and unexpected tax bills, encouraging them to make decisions such as retiring early, or working less hours than would otherwise be the case. 
  • Addressing the advice gap - The FCA and HM Treasury also need to urgently find a way of closing the advice gap to allow experts to have more specific and more directive conversations at little or no cost to the customer.

While these are all important steps to take in order to help pension savers in general through the cost of living increase, greater action is required from the financial services sector and government to provide more relatable and tailored financial information and guidance. This would be a welcome step forward to engage and support people from all backgrounds and cultures to make the best possible retirement preparations.

We need to find more effective ways to connect with Pakistani, Indian, Black, Bangladeshi, and other Asian communities, not just in the language that we use but also by examining the channels that we are communicating through. Some communities have a greater distrust towards large banks and organisations than others, and it’s incumbent on us to demonstrate that we are trustworthy, and that pensions can be a safe place for their money.  It’s up to us to make pensions relevant, and to make sure we are providing tailored support to meet the differing needs of the communities that are struggling the most.  

About the author Pete Glancy

Pete is the Head of Policy, Pensions and Investments at Scottish Widows, part of Lloyds Banking Group's Insurance and Wealth division.

Pete has worked at Lloyds Banking Group for 31 years, holding a wide range of senior positions, including Head of Individual Pension Propositions and Head of Workplace Pension Propositions before taking on the pensions policy brief 6 years ago.

Pete is on the Pensions Panel at the CBI, and the Strategy Council at TISA in addition to numerous industry and trade body working groups

Pete's background Read less

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