Squeezed out or opting out? Understanding ethnic differences in use of financial products and services

The ethnic minority gap in financial products such as pensions and insurance is well-documented, but poorly understood. Drawing on existing and new survey data, and in-depth interviews, this report seeks to understand the scale of this gap, and possible explanations behind it, as well as proposing recommendations to policymakers and the industry on how to reduce the risk of disadvantage faced by ethnic minorities.

Key findings

  • Differences in age and income account for most of the gap in product take up between ethnic minorities and the rest of the population, but not for all products. In particular, gaps remain in pension, insurance and banking coverage.
  • While there is substantial overlap between ethnic minority and White consumers in their reasons for not using financial products, ethnic minorities are more likely to do so by preference as opposed to financial constraints.
  • Ethnic minorities are less likely to have a personal or private pension, but they also tend to have more diverse retirement plans, for example, being more likely to invest in their own businesses or children. 63% expect to have enough to live on compared to 56% of the general population, raising some concerns as to whether they are over-confident and adequately informed.
  • Low insurance uptake does not always come back to issues of affordability. Many ethnic minority consumers opt to “self-insure”, as they are not convinced insurance provides good value for money.
  • Low-income Asians are particularly unlikely to have current accounts, although why this is the case is unclear. Many consumers without a current account do not want or feel they need one, though poor awareness of basic bank accounts may also play a role.

We recommend five actions that policymakers and industry can take to improve uptake of financial products and services, and ensure more people have the products and services appropriate to them:

  • Lowering the pensions auto-enrolment threshold to £0, with employer contributions starting from the first pound earned.
  • A joint government and industry awareness building campaign that improves trust in financial services.
  • The development of peer-led support hubs centered in ethnic minority communities to provide a open and friendly environment to learn more about financial products and services.
  • Targeted support for new migrants to help them integrate into the financial system more quickly
  • Improved data collection to help develop a clearer picture of ethnic minority use of financial services.


Related items:

Page 1 of 1