Ethnicity differences in private pension participation after automatic enrolment

This research used data made available via the Office for National Statistics (ONS) Secure Research Service, which is being expanded and improved with ADR UK funding.

Author: Jonathan Cribb, Laurence O’Brien, David Sturrock, Institute for Fiscal Studies

Date: May 2025

Research summary

The share of employees saving in a workplace pension rose significantly during the 2010s due to the introduction of automatic enrolment into workplace pensions. This policy reduced inequalities in pension participation by age and earnings. However, research carried out by the Institute for Fiscal Studies (IFS) found notable differences in workplace pension participation rates between ethnic groups in the UK, with important implications for future retirement incomes. Policy recommendations have been shared with policymakers, representatives from the pensions industry, and other stakeholders with an interest in retirement outcomes.

This work was supported by the Centre for the Microeconomic Analysis of Public Policy at the IFS, as well as funding from the IFS Retirement Savings Consortium and the Economic and Social Research Council. It was part of the Joint Programming Initiative: More Years, Better Lives project and supported by a grant for the project “Economic opportunities across racial and ethnic groups in the United Kingdom”.

Data used

This project used data from the Annual Survey of Hours and Earnings linked to the 2011 Census for England and Wales.

• Office for National Statistics, released 3 July 2023, ONS SRS Metadata Catalogue, dataset: Annual Survey of Hours and Earnings linked to 2011 Census – England and Wales, https://doi.org/10.57906/80f7-te97

Additional data sources:

• University of Essex; Institute for Social and Economic Research, released 2025, Understanding Society: Waves 1–14, 2009–2023 and Harmonised BHPS: Waves 1–18, 1991–2009. 19th Edition, http://doi.org/10.5255/UKDA-SN-6614-20
• Office for National Statistics, released 2019, Wealth and Assets Survey. 2nd Release, http://doi.org/10.5255/UKDA-Series-2000056

Methods used

The researchers used data on workplace pension contributions and earnings from the Annual Survey of Hours and Earnings, combined with information on religion and ethnicity from the census, to examine differences in pension participation by ethnic group. They used multiple regression analysis to assess whether these differences could be explained by observable individual and job characteristics.

Research findings

The research found differences in the proportion of employees opting out of their workplace pension by ethnic group. Employees of Pakistani ethnic origin were around 6 percentage points more likely to opt out than white employees, while those of Bangladeshi origin were around 14 percentage points more likely. These differences could not be explained by individual, job or employer characteristics, as shown in the figure below.

Instead, there is evidence that these patterns are linked to Islamic religious beliefs, in line with Islamic teachings on saving. Islamic teaching is generally interpreted as forbidding some investments, such as those in ‘unethical’ industries like alcohol or tobacco, and those that involve earning interest. Muslims across different ethnic groups had higher opt-out rates, especially among those who said their religious beliefs had a strong influence on their life. Around half of Muslim respondents also reported that their religious beliefs directly affect their saving and investment decisions.

Consistently opting out of a workplace pension can significantly reduce retirement income, as individuals miss out on employer contributions and generous tax reliefs. For an average-earning Pakistani or Bangladeshi employee who opts out over their entire working life, this could amount to around £16,500 less per year in retirement.

Research impact

The research has been published as both an academic working paper and a shorter policy report. Throughout the project, the team engaged with members of the pensions industry via the IFS Retirement Savings Consortium. A final launch event brought together researchers and stakeholders to discuss the findings.

The study was widely reported in the media and received responses from the Minister of State for Pensions, Torsten Bell, and the director of policy and advocacy at the Pensions and Lifetime Savings Association.

Research outputs

Publications and reports

• Academic working paper, 2025: Ethnic differences in retirement wealth accumulation in the UK
• IFS policy report, 2025: Ethnic differences in private pension participation after automatic enrolment

Presentations

• Presentation at Netspar International Pensions Workshop, 2024
• Presentation at Work, Pensions and Labour Economics Study Group (WPEG), 2024
• Online event, 2025: Ethnicity gaps in pension participation

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