By Charles Cotton, Senior adviser for performance and reward, CIPD
The survey commissioned by the CIPD to help inform the report Addressing the barriers to BAME employee career progression to the top, also asked some questions about whether workers from a BAME background were saving for their retirement. While we have carried out surveys of employees in the past about how they were saving for the time when they stopped working, we had never explored how these findings could differ by ethnicity.
Overall, our survey doesn’t find much of a difference in pension membership between white British workers and those from a BAME background. While 79% of all BAME workers are paying in to a pension plan (73% through a workplace scheme and 6% through their own personal scheme), 81% of British white employees are saving into a pension (76% through a workplace scheme and 5% through a private pension).
That pension membership is so high for both groups is a testament to the success of pension automatic enrolment, where workers aged between 22 and the state pension age, earning more than £10,000 a year, and working in the UK are put in a workplace pension to which both they and their employer must contribute, unless they opt out of the scheme. Though the government is currently proposing to drop the minimum age to 18 within the next 10 years.
When it comes to the types of workplace pensions of which BAME and white staff are members, white workers are more likely to be in a defined benefit pension plan (25%) compared to BAME staff (19%), and slightly more likely to be members of a workplace defined contribution scheme (41%) than their BAME colleagues (38%).
Part of this is due to BAME staff are more likely (16%) to be unaware of the type of pension plan into which they are saving, compared to white British employees (10%).
Among those from a BAME background, Indian/Pakistani/Bangladeshi workers are most likely to be members of a defined contribution arrangement (44%).
However, the 79% of BAME workers saving into a retirement scheme is an overall net figure and masks the fact that just 67% of black workers are members of a pension plan, either through the or outside the workplace . While 22% of such staff are members of a defined benefit pension, just 30% are contributing to a defined contribution plan.
This is the first time that we have looked at pension take up by ethnicity and we will need to explore why workplace pension membership varies by particular ethnic background. For instance is it linked to earnings or employer-size? Is it linked to opt outs and, if so, why are certain BAME workers more (or less) likely to abandon their pension scheme?
When it comes to employer pension contributions, BAME and white British workers report that as a proportion of their salaries their employers are paying in similar amounts to their retirement funds. The average employer contribution for white workers is 6.3%, while it is 6% for BAME workers. However, a similar proportion of workers, (29% of white Britons and 28% of BAME staff), do not know how much their employer is contributing on their behalf.
A surprisingly high proportion of workers (22% of white staff and 24% of BAME) also don’t know how much they are paying in to their own workplace pension. Among those that do, on average, white staff contribute more (6.1%) than BAME (5.3%).
To my mind, there are a number of implications from these findings. HR needs to:
Of course, the challenge of ensuring that all BAME groups are not missing out on the benefits of pension membership can’t be met by HR alone. The Government, the industry and BAME employees themselves have important roles. For instance, the Government should explore the impact for BAME staff if the automatic enrolment earnings threshold was lowered from £10,000, while the financial service industry should look at how it communicates with its existing and potential clients.
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I am sorry but the focus should be on women and for that matter men who are now approaching or in retirement if they were contracted out of the state pension. Until 2 years ago everybody got a full state pension, now under the new rules if you have been contracted out, you do not get the full £155 per week. We had no choice about being contracted out of SERPS. Also a week of a later date of birth means months of waiting for the state pension. It is unfair and nobody does anything about it.
16 Feb, 2018 15:26
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