The financial gender gap continues to prevail with women from ethnic minorities facing an “uphill battle at every stage of their financial life”, compared with white women and the wider adult population, according to research from Scottish Widows.

With 1.4 million women currently earning less than £100 (€112.5) a week through the state pension in the UK, many women will face additional inequalities in their overall retirement savings, the firm said.

Scottish Widows’ latest Women and Retirement Report shows that one in five (21%) black women are ineligible for auto-enrolment pension schemes as they do not meet the £10,000 earning criteria, compared with 17% of south Asian women and just 4% of white women.

Women from black, Pakistani and Bangladeshi backgrounds also suffer some of the highest rates of unemployment in the UK, with 11% of the former and 12% of the latter out of work, versus 4% of the country as a whole, the report noted.

Pensions and pay inequality

Once in employment, ethnic minority women are then affected by the gender pay gap – with women in the UK earning almost £10,000 less than men, as the average male salary is £36,000 compared with the average female salary of £25,000, according to the research.

Ethnic minority women are also disadvantaged by a broad range of issues which intensify financial instability, the report said. For example, they are more likely to rely on rented accommodation with 62% of black women renting compared with one in three (31%) south Asian women and one in four (26%) white women. Just 12% of black women own a home outright compared with 39% of white women, it added.

Looking ahead, ethnic minority women are least likely to cite the state pension as a source of income for retirement (including only 32% of Indian women and black women), and they are most likely to rely on cash savings which are under pressure in the current high-inflation environment.

In addition, more than half (54%) of black women have little or nothing saved for retirement (compared with just 35% of white women), while over two thirds (68%) are concerned that they will run out of money during their retirement years, which drops to 58% among white women.

Selina Flavius, founder of the financial coaching and training company Black Girl Finance, 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.”

Breaking the cycle of financial injustice

Despite the statistics painting a concerning picture of financial instability for ethnic minority women, there are solutions that will help to accelerate the progress towards equity. Government initiatives – such as lowering the pension auto-enrolment threshold from £10,000 – could make a positive difference, alongside improved advice to better equip women with the knowledge they need to effectively manage their finances.

“Our research shows that Black women, and indeed many women from different ethnic backgrounds, are disproportionately affected by the impacts of pension auto-enrolment thresholds and the tough economic climate which are causing many of them to be in a financially vulnerable position as they reach retirement age,” said Ranila Ravi-Burslem, Scottish Widows’ intermediary distribution director.

“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 added.

Women’s pension pots half the size of men’s

Meanwhile, latest data from Aviva has found the gender pension gap begins to widen significantly from the age of 35, showing significant gaps between how much women pay into their pension compared with men.

Based on the workplace pension data for just over 5 million pension plans, the gap between women’s and men’s pension contributions for 35 to 39-year-olds is 21%, up from the 18% gap last year. It then increases to 24% for 40 to 44-year-olds and 27% for 45 to 49-year-olds before stretching to 32% for 50 to 54-year-olds.

The amount paid in pension contributions has a big impact on retirement income, and the difference between women’s and men’s contribution rates is stark.

Aviva: the gap between women’s and men’s pension contributions

AgeJan 2022Jan 2023































Source: Aviva

The new data also found the gender pension imbalance persisting into retirement with women aged 60-65 years old having pension pots which are on average just over half (57%) the size of men’s pots at the same age.

Michele Golunska, managing director for wealth and advice at Aviva, said: “This suggests a clear line in the sand around the age that women are often making milestone career and childcare decisions and considering opting to work part-time.

She noted that pension contributions are unlikely to be a deciding factor when considering whether to work part-time, but what is important is that the long-term impact on a pension is understood when making that decision.

“This is crucial to good financial planning. Some might consider upping their pension contributions, but this would have to be carefully balanced against disposable income. An option that some parents may consider is sharing the caring responsibilities to help spread the long-term impact on pension savings,” she explained.

Golunska added: “It is encouraging to see the gap in contributions from age 45 has reduced, compared to last year. This might suggest there are some women who are recognising they have a gap in their pension contributions and are taking action to help reduce it.”

IPE Diversity & Inclusion 2023 Webinar

On 1 March, to mark the start of International Women’s Month, IPE held an online seminar to discuss the differences in retirement outcomes for men and women around the world and explore innovative, cutting-edge ideas to make retirement fairer.

With presentations from and conversations with international experts, the seminar took an in-depth, thorough examination of the root causes of gender pensions inequality, the potential policy landscape and innovative ideas to narrow the gap.

Visit the event’s website to view the recorded session

To read the digital edition of IPE’s latest magazine click here