The Social Market Foundation carried out a study last year, looking into the disparity between Black and Asian people contributing far less into their pensions than their White counterparts. Figures quoted from the research stated that just 25% of people from BAME minority groups pay into their workplace pension, compared to the national average of 38%.
These figures recently struck a chord with me as a friend of south asian heritage informed me that he opted out of his company pension, despite working in for an investment bank. I told him he was “crazy”, especially as a higher rate taxpayer and his employer paying a generous contribution into his pension to match his amount. However, his response was simply that he “did not believe in pensions”.
In my early days as a Financial Adviser, I encountered this many times. Some of the rebuttals I could understand, as there were other investments such as property in place, with rental income forming the main retirement strategy but in many cases, clients did not have any other backup options.
My main takeaway thought today is that the lack in engagement in pensions, lies in the lack of understanding of the financial services industry in general particularly for those of a background where money isn’t often spoken about. I previously carried out some independent research that highlighted that many were confused by terminology such as tax relief, final salary, defined contribution or defined benefit. In the borough of Tower Hamlets I found that the level of financial literacy/education was very poor. Many of whom I spoke to had limited understanding of pensions, investments or even basic budgeting. This was despite the fact that some of the students were studying Maths at GCSE and A-Level and were planning on pursuing Finance-based degrees at University.
I feel that there needs to be a review of the terminology used today within financial services and even translating terms into native language and colloquial tongue. However, there is still a long way to go before people stop taking financial advice from “their mate in the pub” or the ‘Uncle from the next door!”