Provider Scottish Widows says the ethnicity and gender pay gaps are amplified in retirement by pensions policy and is calling on government to scrap the £10,000 auto-enrolment threshold. It also wants to see the government put in place financial education programmes to support women from different backgrounds. 

 

More than half of Black women do not have anything saved for retirement, Scottish Widows’ latest Women and Retirement Report, released ahead of International Women’s Day on 8 March, has found. Its research shows that 54% of Black women do not have retirement savings, compared with 40% of South Asian women and 35% of White women.  

 

Women from Black, Pakistani and Bangladeshi backgrounds suffer some of the highest rates of unemployment in the UK. However, even where they are employed, they are hit by the gender and ethnicity pay gaps, which affect not just their ability to save, but also their eligibility to be auto-enrolled: the £10,000 earnings threshold for auto-enrolment currently means that a fifth (21%) of Black women are not auto-enrolled by their employers. The same is true for 17% of South Asian women but applies to just 4% of White women. 

 

The research also found that ethnic minority men and women are more likely to cut pension contributions in response to the high cost of living. 

 

 

The intermediary distribution director of Scottish Widows,Ranila Ravi-Burslem, said the research shows that many women from different ethnic backgrounds are disproportionately affected by the impacts of pension auto-enrolment thresholds and the tough economic climate. 

  

“As International Women’s Day this year challenges us all to ‘embrace equity’ it’s a perfect time to focus on addressing some of these deep-seated issues. We’re calling on the government to remove pension thresholds that unfairly affect women and put education programmes in place to bridge the gap for women from all backgrounds,” she said. 

 

Policymakers have so far not engaged with calls to remove the requirement to earn £10,000 from a single job in order to be auto-enrolled. Those that support the threshold usually base their view on the concept of replacement ratios, arguing that the state pension provides an adequate income replacement for low earners, who if auto-enrolled might therefore see their disposable income cut unnecessarily.  

 

New analysis by the Department for Work and Pensions shows that nearly two-fifths (38%) of working age people, about 12.5m, are undersaving for retirement based on target replacement rates, but that this applies to only about 14% of those earning less than £14,500 because the state pension makes up a greater proportion of their future retirement income.  

 

However, when measured against the Retirement Living Standards by the Pensions and Lifetime Savings Association, which looks at income needs, the DWP found that lower earners are more likely to be undersaving.  On that measure, about a third of the lowest earners are not meeting the ‘minimum lifestyle’ income of £12,800 for a single and £19,900 for a two-person household. 

 

 

Scottish Widows is now partnering with financial coaching company Black Girl Finance to help raise awareness and resilience. The Black Girl Finance Festival, led by author and financial influencer Selina Flavius, takes place at the University of Westminster on 11 March.  

 

Flavius said: “The findings are clear – urgent action needs to be taken now to ensure that Black women are not unfairly affected by a lack of advice and support while enduring unjust financial challenges. The ethnicity pay gap is a key contributor to this, which shows that Black, Asian and minority ethnic women earn lower salaries than White British women, which can undoubtedly have a negative impact on their financial resilience, long-term pensions and investment planning.” 

 

Through her festival, Flavius wants to give women tools and knowledge to help them thrive financially regardless of their circumstances.  

 

Ravi-Burslem, who will be speaking at the event, added: “It’s time to break the cycle of financial injustice, and we see this event as a crucial step in the journey to more accessible finance for all.” 

 

She urged the pensions industry to step up and support to the Money and Pensions Service in helping women of all backgrounds understand their finances and the importance of saving for later life. 

 

 

Scottish Widows managing director Jackie Leiper said more is still needed to directly tackle the gender gap.  

 

“There needs to be more support for childcare, a significant financial challenge and barrier to wider equality. There is also more to do to engage ethnic minority women, both on their likely entitlements to state pension, and to support them in managing their different approaches to funding retirement,” she said. 

 

  

As well as overhauling the provision and cost of childcare to support women returning to work, the provider is, among others, calling for equal shared parental leave rights.