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Pension 'ethnicity gap' exposes large inequalities in income for ethnic minority pensioners

On average, the gap in annual pension income between a female pensioner from an ethnic minority and a white male pensioner is 51%, according to a new report. Photo: Getty

Minority ethnic pensioners are £3,350 ($4,354) worse off on average per year than other people their age, revealing a gap in annual pension income of 24%, a new report has found.

The analysis exposes a sizeable “ethnicity gap” and “large inequalities” in UK retirement incomes, according to the report from pension provider the People’s Pension.

An even bigger divide is exposed when looking from a gender perspective, with minority ethnic women the worst off. The average total pension received by a minority ethnic woman is 51% less than a white male pensioner.

Asian ethnic groups are particularly affected by pension income inequality with a gap of 30%, according to the findings based on analysis of a survey of more than 40,000 households carried out by the Department for Work and Pensions (DWP).

The gap in annual pension income for “black African, Caribbean or black British” groups stands at just under 27%.

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Only one category — listed as “other ethnic group (Arab, other ethnic group)” — showed higher average pension incomes than pensioners from white ethnic groups, at 6% higher.

The ethnicity gap is due partly to issues with the state pension system, the People’s Pension said. There is an annual state pension income gap of about £600 for ethnic minorities — for example, DWP data showed that 85% of Asian pensioner households received the state pension compared with 98% of white pensioner households.

Other factors affecting the ethnicity gap include lower average earnings, variable employment rates, and higher rates of self-employment among minority ethnic workers.

“Our report highlights large inequalities, which will become starker as the growing ethnic minority population reaches retirement age,” Gregg McClymont, director of policy at the People’s Pension told the Guardian.

“Understanding the size of the problem and causes is a vital first step in devising appropriate policies for closing the gap.”

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The People’s Pension has over 5 million members and is one of the biggest “auto-enrolment” pension providers with £9bn of assets under management.