What still needs to be done to finally close the minority ethnic pay and savings gap?

  • 01 February 2021
  • 10 mins
  • The ethnicity pay gap remains a reality for many

  • Lower salaries can lead to lower levels of savings

  • And this can have a detrimental effect on financial wellbeing

In October 2020 the Office for National Statistics published Ethnicity pay gaps: 2019. It shows how many people from minority ethnic` backgrounds still face lower rates of pay than their white counterparts.

And in January 2019, The Runnymede Trust published Economic inequality and racial inequalities in the UK. It found that whilst those of Indian origin have around 95% of the savings of their white peers. This falls to less than half for Pakistani households, and around a third for those of Black Caribbean descent. Black African and Bangladeshi households have little more than 10% of the savings of white British households.

This is particularly stark when it comes to pensions savings as we highlighted in Mind the gap: ethnicity and pension inequality. In February 2020 The People’s Pension published Measuring the ethnicity pensions gap. It found the average minority ethnic pensioner’s income is just under 25% less than a white pensioner. This leaves a minority ethnic pensioner around £3,350 a year worse off.

If they have less pay and lower savings, it can be harder for people form minority ethnic backgrounds to create a solid financial foundation, set aside some rainy-day money, or plan for a more secure financial future. This could translate into greater financial stress and impact their overall wellbeing.

Differing differences in ethnic pay rates

The same ONS report found regional differences that illustrate how far some parts of the country still have to go. Perhaps the biggest surprise is the largest difference can be found in London – often held up as a beacon of multiculturalism – where the gap stands at 23.8%. This means that on average for every £1 earned by a white Londoner, a minority ethnic Londoner earns 76.2p.

It goes on to highlight hourly pay differences across various ethnicities. In England and Wales, the highest hourly rates of pay go to workers who identify as White Irish, followed by Chinese, then Indian. British White employees come in fourth. The lowest hourly rates are reported by employees who identify ethnically as Caribbean, Bangladeshi, African or Pakistani.

Looking at the pay gap through a gender lens the ONS analysis found men from an ethnic minority earned an average of 6.1% less than their white counterparts, while ethnic minority women earned an average of 2.1% more than their white co-workers. A deeper analysis shows that this is because women Chinese households earn 25% more than their white colleagues and Indian women earn about 10% more. All other minorities earn less.

Perhaps as an indication of how attitudes are changing, the ONS found different age groups also demonstrate different pay gaps. For employees aged 30 and over, typically ethnic minority workers earn less than their white counterparts, but in the 16–29 range, ethnic minority employees often earn more.

What are the factors behind ethnic pay gaps?

There are a number of reasons why these pay gaps persist, despite the fact that it is against the law to pay people less for doing the same work. The interviewees who have helped to compile our series of articles on the financial challenges faced by ethnic minorities, have all made it clear that there are many causes underlying these trends.

Obstacles to better education and qualifications; access to better-paying jobs; a lack of role models and mentors; a lack of promotion opportunities; as well as conscious racism and unconscious bias. All can have a part to play.

A personal tale

One of our own advisers at Schroders Personal Wealth, Karim Chowdhury, has shared some of his knowledge around both pay and savings gaps, based on his own experience advising clients and through working with white and minority colleagues.

Karim describes himself as of second-generation Bangladeshi heritage. Neither of his parents went into higher education, but they had aspirations that their children would; and Karim and his four siblings all went to university.

First of all, he points to cultural differences around saving and investing: “For lots of the first generation of immigrants who come to this country, the most important focus is having enough money for the day to day,” he says. “And people often send money back home, because they have a responsibility for their wider family, so there just isn’t enough money to even think about saving and investing for the future.

“Then, there’s a real lack of financial education. I talk to lots of people who don’t understand how to claim their State Pension, let alone save for a private one. I’m often explaining how investing in a pension works. Most people from our backgrounds are entrepreneurial and run their own businesses, and they build up property as an investment because it’s something that’s better understood.

“If there’s not much money around when you’re growing up, then there’s not much talk or learning about money. Unlike with wealthier parents, things aren’t being put in place for children so that they have a better start in adulthood. So, there’s a lot to overcome.”

Karim believes there needs to be more radical changes to lift the obstacles people from minority backgrounds face in getting better pay and better career opportunities.

“I had an Asian teacher at school who told me I would have to work twice as hard to get to where I wanted to be. That’s something that still sticks with me,” he said. “When I look around in my own company, there's a very diverse adviser population, but I don’t see any regional directors or client directors from a minority background. I’m proud to see so many women in leadership roles in my area of the business, but it would also be great to have more minority ethnic people in senior positions because it's so important to have role models.

“No-one is asking any organisation to hand jobs out to minority staff. But maybe it’s time to look at the interview process to make sure we are reflecting society and the communities we serve. This could really boost the opportunities for minority ethnic people to be considered for important roles.”

He also spoke to us about the importance of mentoring in a company. This is something he has benefited from and undertakes himself. He’d also like to see more open and relaxed discussions about cultural differences.

“The understanding around Ramadan, for instance, is quite limited,” he says, “people are reluctant to ask questions, or even mention anything, when I’d be very happy to talk about this. Personally, I do socialise with my colleagues outside of work. But some people from certain backgrounds may feel uncomfortable with this, as a lot of the events are centred around drinking and this goes against their beliefs. So this can lead to them being excluded.”

Karim also acknowledges that bias, both conscious and unconscious, is something he often has to deal with. “A young Asian financial adviser goes against the expectation. People still think of a financial adviser as a middle-aged white male. When I’m sitting in my car after meeting a client at their house, I do still have people coming up to my car to ask if they can ‘help’ me because they’re wondering why there’s an Asian man in their neighbourhood. My white colleagues can’t believe it, but for me, this is just how it is.”

We spoke to Marietta Connery, Human Resource Director at Schroders Personal Wealth about the measures the industry is taking to become more inclusive and representative. “The industry has suffered for many years with the image that financial advisers are middle aged men,” she told us.

“The industry has made advances in addressing the gender balance and is getting there when it comes to being inclusive to the LGBTQ community. But is still struggling when it comes to representing and attracting talent from ethnic minority backgrounds.

“Internally, our diversity networks are an opportunity for people from minority communities to talk to us about their experiences and share knowledge to help us shape our culture, as well as making sure our products and services are appropriate. As Karim mentioned, we are also very active in promoting mentoring as a means of helping employees develop the softer skills that can help them progress their careers.

“Externally, we are members of the 100 black interns an industry initiative which aims to create careers for people from minority ethnic backgrounds and source a more diverse talent pool. As part of this we are currently interviewing for two positions within our investment team. And we are looking at how we can work with the Social Mobility Foundation.”

Karim is genuinely excited that so much attention is being paid to the issues of discrimination at work and financial disparity. He adds: “It’s really good to see that this is being seriously looked at now. But it’s what happens next that’s important. This can’t just be a tick-box exercise. Lots of really talented people who could offer so much more are being overlooked.”

What are the corporate benefits of a more diverse and engaged workforce?

In 2017, the Chartered Institute for Professional Development produced Addressing the barriers to BAME employee career progression to the top. It found that although one in eight UK workers is from a minority ethnic background, representation in management positions was only one in sixteen. This implies that minority ethnic employees progress their careers at half the rate of their white colleagues.

Yet according to Bridge the gap, a February 2020 report from the Confederation of British Industries, companies with the most diverse leadership teams are likely to outperform their competitors on profitability by 33%.

As we reported in How will we close the minority ethnic career gap? minority employees need to see themselves represented at all levels of the organisation. Without role models and senior mentors, it can be much harder to imagine yourself in those positions, and for senior management to imagine minorities working alongside them.

So perhaps the biggest indicator that a company is truly inclusive for both employees and clients is when minority ethnic employees can achieve top managerial positions.


Helping minority employees to gain better pay and career opportunities will allow them to take greater control of their financial lives. This is likely to have the knock-on effect of improving their financial wellbeing, but it can also have much wider positives.

In February 2017, the government-commissioned McGregor-Smith Review titled Race in the workplace, estimated helping everyone in the workforce be able to fulfil their potential could increase productivity to deliver an extra £24 billion per year to the UK economy.

So there are only good reasons to tackle what remains of the pay, savings and opportunity gap and make sure that the UK workplace is one where everyone can thrive.

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