An analysis also reveals there is a 48 per cent gender gap in private pension wealth between men and women.
It has found that retirees in 2050 are on course to receive £800 – or 8 per cent less – private pension income than those retiring today, and nearly 15 million people are undersaving for retirement.
Just one in four of those from a Pakistani or Bangladeshi background are saving into a pension..
Although employed people are automatically enrolled into workplace pensions, those who are self-employed are not.
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If you are self-employed, you can open a SIPP with multiple providers and choose your own investments. You will get tax relief at your marginal rate when you pay into the pension, so if you are a basic-rate taxpayer, you can claim back 20 per cent tax on what you pay in.
If you open a LISA, you won’t get tax relief when you pay in, but will get to withdraw the money tax-free once you retire, and the Government will top your savings with a bonus of 25 per cent.
Low-earners in the private sector
However, some poorer workers feel they cannot afford the 5 per cent and opt out. In this case, the employer then has no obligation to pay into a pension for them.
If you are a low-earning private sector employee who cannot afford to pay 5 per cent of your qualifying earnings into a workplace pension, one option is to pay into a SIPP instead.
Work from the IFS also found that employees of Pakistani or Bangladeshi ethnic origin are almost twice as likely to opt out of workplace pensions as other employees.
With private pension savings, money is invested, or in cash, and is then withdrawn from a pot during retirement.
“The Government, employers and the pensions industry should therefore look for effective ways to increase awareness of sharia-compliant pension saving among Muslim employees and to make it easier for them to switch to sharia-compliant investment strategies,” he said.
Women saving for private pensions
Experts have offered guidance to women hoping to increase their pension saving. If you are working part-time and automatically enrolled into a workplace pension scheme, consider increasing your monthly contributions.
If you earn less than £10,000 per year, speak to your employer about your options for joining your company pension scheme, as your employer is not obliged to enrol you.
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