Over 8.6 million people from “underpensioned” groups, such as ethnic minorities, people with disabilities, caregivers, and single mothers, have private pension incomes that are anywhere between 18 per cent and 64 per cent lower than the UK average, according to Now:Pensions.
According to the new “Underpensioned Index 2022,” which was produced in collaboration with the Pension Policy Institute (PPI), there are a number of shared characteristics among these groups that are acting as obstacles to saving, such as non-traditional work schedules, a lower percentage of homeowners, and being influenced by labour market inequities.
It found that since the initial release of the 2020 index, the pension savings gaps for some of the categories with the highest financial risk had gotten worse. The employment rates of the underpensioned groups continue to be significantly lower than the average for the UK population, particularly for members of some ethnic communities.
The average annual income of women is 67 per cent that of men and 80 per cent of the average in the UK. Just 60 per cent of the UK average applies to single mothers, a much lower percentage. The difference between the average incomes of women and those of males in the UK has increased from 12 per cent to 20 per cent during 2018.
Nearly 2.5 million of the 14.6 million employed women in the UK do not match the requirements for automatic enrolment, compared to 8 per cent of male workers. Meanwhile, around 79 per cent of workers who do not match this qualification condition are women, who make less than the minimum wage of £10,000. This group includes 1.9 million women.
Underpensioned groups’ private pension incomes continue to be below than three-quarters of the typical population’s private pension income, with several groups seeing notable drops from the 2020 Index. Private pension incomes for single moms have stayed at 50% of the national average, whereas the difference for other women and caregivers has somewhat (though not significantly) shrunk.
In almost all cases, the state pension will provide the majority of retirement income. Most underpensioned groups will find it difficult to earn more than the minimal PLSA retirement living standard of £10,900 per year for a single person and £16,700 for a couple when private pension income is combined with State Pension and other benefits.
Pensions Policy Institute lead researcher Lauren Wilkinson says: “Private pension incomes of underpensioned groups remain below three-quarters of average population private pension incomes, with some groups experiencing significant declines compared to the 2020 Index. When income from State Pension and benefits are taken into account, the underpensioned gap is smaller but still significant.
The current economic climate could exacerbate the underpensioned gap, making it more challenging to implement further policies to narrow the gap in the short term, but it is important that the underpensioned challenge is approached with a long-term view.”
NOW: Pensions and report author head of campaigns Samantha Gould says: “There are a total of 8.6 million people in underpensioned groups that are locked out of automatic enrolment, missing out on potentially billions of pounds of pension saving annually. We have been campaigning on behalf of underpensioned groups since 2019. Our latest report has revealed that private pension incomes were less than 85 per cent of the population average, with some groups experiencing significant declines compared to our 2020 index.
Whilst the current economic environment means that it is challenging for the government to implement potential remedies, doing nothing is not an option. Action is needed now to reduce the pensions gap and allow everyone to enjoy the comfortable retirement they deserve.”
NOW: Pensions chair of trustees Joanne Segars OBE says: “Since it was introduced ten years ago, auto-enrolment has transformed how millions of people in the UK save for their pensions.
Yet for far too many in our society, a comfortable retirement remains out of reach, usually through no fault of their own. These groups are often locked out of the auto-enrolment system, unable to earn enough to put money aside for later and, as a result find themselves on the wrong side of a growing pension savings gap.
At NOW: Pensions, our mission is to fight for a fair pension system that enables everyone to get the retirement they deserve.”