Retirement saving in the UK: a life-cycle analysis

Purpose – This paper studies long term savings accumulation in the UK. We use cross- sectional information from the extensive dataset of the Family Resources Survey to compare long term saving amongst different ethnic groups with our control group, the native population. We reflect on whether different groups are more likely to suffer poverty in retirement. Design / Methodology / Approach – In our analysis we apply the life cycle framework to explain saving profiles. This theoretical model has been used extensively in the field of economics and can be applied to empirical studies to examine changes in income and saving patterns over the life-course. The framework contends that individuals make savings decisions to smooth consumption over different phases of their life-cycle. Findings – Our findings indicate that socio-economic factors are key elements in determining whether individuals plan for retirement, if factors are controlled for the differences in saving behaviours between ethnic minorities and the control population decrease considerably. Asian women, with good education and social standing display greater saving rates than the control group, while the socio-economic disadvantage suffered especially by Pakistani and Bangladeshi women is key to their inability to save long-term. High levels of poverty in retirement are more likely to be caused by the interaction of low levels of education, part-time work and long spells of unemployment than by ethnicity. Originality / Value – Our important contribution to the debate on savings by ethnic minorities is the extension of the life-cycle model to specific sections of the population, to proffer new insights into their saving / dis-saving patterns, and ultimately their welfare in retirement.