The coronavirus pandemic has seen a higher proportion of people who identify as BAME dipping into their savings to cover expenses, prompting warnings of longer-term consequences for this group.
The regulator’s latest insights article on ethnicity, personal finance and coronavirus, published today (February 24), found the effects of Covid-19 have left BAME savers in a more vulnerable position than their white counterparts.
Its analysis was based on the regulator's Financial Lives 2020 research which surveyed more than 16,000 people between August 2019 and February 2020 and a further 22,000 people in October in a bid to analyse the impact of the pandemic on consumers.
The City watchdog found that since the pandemic has started, 11 per cent of BAME individuals have dipped into their savings to pay down loans versus 5 per cent of white individuals, and 26 per cent have used savings to pay for day-to-day expenses, compared to 17 per cent of white savers.
There were similar differences when it came to investing, with a quarter (27 per cent) BAME savers having an investment compared to a third (35 per cent) of white individuals.
However, a higher proportion of younger BAME savers have any investments than white consumers of the same age - 23 per cent compared with 17 per cent, the FCA found.
Again, the regulator found differences as to how these investments have been used during the pandemic with BAME individuals more likely to move money into cash due to concerns about market volatility.
Keith Richards, chief executive of the Personal Finance Society, said: “It is clear, even before the pandemic hit, there was disparity between ethnic groups in their interactions with different financial products, and their own finances.
“However, it is also clear that the effects of the pandemic have served to worsen the engagement gap for BAME groups with financial services.
Richards added: “The effects of Covid-19 on employment, savings and investments have revealed a troubling picture that has placed BAME consumers in a more vulnerable position.
“It is important they receive support and professional advice, as we look ahead to the hope of an end to lockdown.”
The regulator's work also found there were concerns when it came to pensions.
Over three-quarters (77 per cent) of white individuals have private pensions, compared with 57 per cent of BAME individuals.
This varies even more among the different BAME groups – with black savers more likely to have a pension (64 per cent) compared to Arab individuals (45 per cent).
The FCA stated: “During Covid BAME consumers have been more likely to use their savings or to reduce payments into pensions to top up their income or meet other expenses.
“This of course may have longer-term consequences for pensions and also for the accumulation of other financial assets – typically for use in later life.”
Earlier this month, data from the FCA’s Financial Lives 2020 research revealed that between March and October last year the the number of adults with characteristics of vulnerability increased by 3.7m to 27.7m, a 15 per cent increase on the number identified in February 2020 before the first wave of the pandemic hit the UK.
The figures prompted concerns the pandemic has compounded financial inequality in the UK, with BAME adults, those aged between 18-54 and the self-employed hit particularly hard.
Yesterday (February 23), the regulator published its long-awaited guidance setting out the way firms should treat vulnerable clients.
In the paper, the FCA warned firms could expect to be asked to demonstrate how their business model, actions and culture ensured the fair treatment of all customers, including those deemed vulnerable, on a regular basis.
The guidance will also be used in enforcement cases against firms under its watch.
amy.austin@ft.com
In recognition of the change being brought to financial services, The FTAdviser Diversity In Finance Awards 2021 will soon be open for submissions (in March), from individuals and from companies who can demonstrate they have gone the extra mile in 2020 to improve diversity and inclusion and make their businesses better for clients, staff and the wider community.
For more information on the categories visit: FTAdviser Diversity In Finance Awards 2021.
