Swathes of the population who are already facing financial exclusion are not even on the radar of pension schemes, as new research has found that more than one in three pension schemes don’t collect any diversity data on their members at all. And the ones that do often only scratch the surface, tracking just age and gender.
This is not just a logistical hurdle; it’s a symbol of a deep, systemic issue that fuels the cycle of economic inequality.
The Pensions Gap throws a spotlight on how marginalised groups have been missing out on their chance for a secure retirement. Only a quarter of ethnic minority individuals have a workplace pension, compared to 38% nationally, and for those that do have a pension pot, it’s less than half the size of an average white British person. Disabled? Your pension pot might be just over a third of the average. And though we’re chipping away at the gender pension gap, it’s still at 37.9%. That means women are ending up with disproportionately lower retirement incomes than men.
Retirement has become a “privilege”, as one respondent to a study stated. It’s particularly tough for marginalised communities, who often already face financial exclusion through lower-paid jobs, unpaid labour and unemployment. The result? Financial instability, and poor physical and mental wellbeing when they retire, at best. Outright poverty at worst.
When pension schemes don’t track the diversity data of their members, they’re entrentching the economic divide. Without knowing who their members are, and importantly, who is falling through the net, pension schemes can’t create tailored products or provide specialised education that could help bridge the wealth gap.
Part of the issue is a lack of engagement of minoritised groups. Studies have shown that over a quarter of those from minority ethnic communities see pension schemes risky and in fact turn to religious institutions to provide financial guidance. Pension schemes need to step up and build trust by really getting to know their members, and fill in the gaps – something shockingly few are doing right now. But collecting data is just step one. It’s on the pension schemes to then take some action.
They can start rebuilding trust by providing financial education in multilingual resources, developing targeted education programmes and tailored pension products. They should also think out-of-the-box, like partnering with NGOs or religious institutions to offer resoures via trusted places. Similarly, they could leverage Diversity, Equity and Inclusion champions in workplaces to hand out financial advice in a way that really speaks to people.
With FCA regulations just around the corner, pension funds are at a crossroads. See this as a tick-box exercise or take this as a chance to win back trust from minority groups and make steps to close the wealth gap.
This is a pivotal moment for the industry. It’s more than just compliance; it’s about stepping up as leaders. Pension schemes have the power to reshape norms, push inclusivity front and centre, and disrupt the cycle of economic inequality. By smartly harnessing data for bold action, pension schemes can lead the charge towards a fairer financial future. After all, a secure retirement isn’t a privilege – it’s a right everyone deserves.