Building a healthy retirement savings pot can be a challenge for anyone as they advance through their working lives. Yet, without question, it poses many additional, arduous challenges for those with disabilities.
To put this into perspective, one fifth (22%) of UK adults are currently living with a disability. And people within that community have, on average, a pension wealth that is but a fraction (36%) of the typical UK pension pot.
In practice, that means Britons with disabilities nearing retirement age (60-64) have an average pension pot value of £47,980 – meanwhile their non-disabled counterparts retire with far more sizeable pot of £130,928 on average. It is a huge, huge gap.
These figures are deeply concerning. Indeed, they demonstrate that people with disabilities are far more likely to encounter financial hardship during their retirement, placing them at increased risk of pension poverty.
There is clearly a pressing need to break down the financial barriers preventing people with disabilities from building retirement savings. Highlighting the challenges faced by Britons’ disabled savers is a must to ensure an inclusive and equitable system in which all retirees can live securely and comfortably.
Breaking down barriers to pension planning
Although over half (53%) of disabled people are currently in work — marking record high levels of employment — this figure remains much lower than that of non-disabled individuals (82%), leading to potential financial instability and spawning greater obstacles in saving enough money for retirement. What has principally led to this disparity is the challenges disabled individuals encounter in finding employment or advancing in their careers due to workplace discrimination, limited accessibility, and biased attitudes.
This results in an unfortunate domino effect; fewer accessible vacancies have given rise to the disability pay gap – arguably the largest piece of the puzzle when assessing low pension wealth among those with disabilities. On average, disabled workers earn 13.8% less than their non-disabled counterparts, leading to lower pension contributions and in turn lower overall pension wealth.
This already sizeable issue is exacerbated even further by the prevalence of part-time work among disabled employees. Restricted job opportunities and requests for accommodations, such as reduced hours to increase accessibility, result in lower auto-enrolment rates for workplace pensions schemes, as many part-time workers fail to meet the minimum earnings threshold of £10,000 in a single job to qualify.
In fact, a considerable number of workers with disabilities are subsequently unable to access workplace pensions altogether. To make matters worse, these people are therefore excluded from the many benefits and opportunities that come with employer contributions and tax relief.
Auto-enrolment is currently the government’s widest spread initiative for boosting pension engagement across the UK and is indeed effective when available. As such, excluding people with disabilities, albeit unintentionally, simply creates yet another barrier to building adequate retirement savings.
Promoting inclusivity
The disability pension gap is a systemic issue with deep roots in social bias, working practices and outdated government policy. Conquering it therefore requires a multi-faceted plan of attack.
It is crucial that ongoing improvements are made to enhance inclusive HR practices that thoughtfully consider accommodations for impairments when hiring, in turn helping to tackle discrimination and bias at their roots. There has been some movement on this front: reforms in welfare policy introduced earlier this year, aimed at helping people find work without losing their benefits, mark an encouraging step in the right direction.
What’s more, the government must take action to facilitate affordable – and truly accessible – independent financial advice for all, regardless of wealth or status. Britons with disabilities face a unique set of financial challenges and would require highly personalised advice to navigate their pension planning effectively. Accessible, comprehensive financial advice can empower them to make well-informed monetary decisions, develop a solid savings strategy and optimise management of their retirement savings.
The data shows there is a great deal of work to be done. Overcoming the pension challenges faced by the disabled community will require an overhaul of HR and business practices to ensure equitable job opportunities. Meanwhile, increased efforts to provide access to accessible, affordable independent financial advice will further ensure financial wellbeing in retirement is in no way defined by one’s disability. With enough time and support for Britain’s disabled pension planners, there is no doubt we can bridge the gap in pension wealth, and we cannot waste any time in starting on this mission.
