More retirement planning needed for those with mental health issues

The warning comes from new research by the Money and Mental Health Policy Institute, which found that people with mental health problems may need greater help with retirement planning.

Must try harder

Existing services are not meeting the needs of people with mental health problems, says the report – despite recent efforts across the pensions sector to improve the accessibility of information and services. It was found that information and guidance services were both confusing and difficult to access, leaving many with mental health problems struggling to understand their options.

It also highlights problems with the design and promotion of services that are creating practical barriers for people with mental health needs. For example, many people with mental health problems can struggle to navigate communication channels like using the phone or digital journeys.

Marginalised and excluded

The report warns that many people with mental health problems – particularly those with low levels of savings – feel that existing guidance and information around pensions does not reflect their experience and gives the impression that retirement planning services are ‘not for them’. 

This is in part because poor mental health can lead to lower levels of pension saving, due to factors like having to spend extended periods of time out of work, taking lower-paying jobs or retiring early. 

These problems could be contributing to people with mental health problems being more likely to be ill-prepared for retirement. 

New Money and Mental Health analysis of the Financial Conduct Authority’s 2020 Financial Lives Survey (2) found that, among people in the key retirement planning years (age 45-64):

- 27% of people with mental health problems said that they did not know they had to choose how they will take money from their pension — compared to just 16% of those without mental health problems.

- 51% said that they do not understand the options for taking money from their pension, compared to almost 36% of those without mental health problems.

- Only 17% reported having a clear plan about how to use their pension — again, less than those without mental health problems (25%).

Be mindful of changing mental capacity

The report’s authors urge pension providers and services offering information and guidance – like PensionWise – to improve the support they offer people with mental health problems.

Another key issue highlighted in the report is that people are often making critical decisions on their pensions savings while acutely unwell, and without the right support from services. 

An in depth survey of 272 people with mental health problems found that individuals had spent large amounts of their life savings in one go while unwell, as a result of struggling with impulse control as a symptom of their mental health problems.

Combine with consumer duty

Money and Mental Health is calling on pension providers to take action to improve outcomes for consumers with mental health problems as they implement the consumer duty, which sets out new standards around customer understanding and positive outcomes.

These include:

• Improving the design and advertisement of pensions information so they are more inclusive for people with mental health problems, as well as providing training for staff about the additional barriers this group might face. 

• Taking steps to improve their understanding of how to support people whose capacity may fluctuate. This includes developing routine checks and balances, and being proactive in encouraging customers to disclose their mental health problems. This would help to minimise the risk of people making suboptimal decisions about their pensions when unwell.

Conor D’Arcy, interim chief executive of the Money and Mental Health Policy Institute, said: “Choosing what to do with our retirement savings can be one of the biggest financial decisions of our lives. That can be daunting for anyone, and that’s why the progress made in recent years to make information about pensions easier to understand is a great step forward. But for those of us with mental health problems, the options available to help people understand their options and choose the route that works for them isn’t enough. That’s leaving many people facing a financial cliff edge in retirement.”

D’Arcy calls on firms to make this a part of consumer duty, which comes into force in July. He urges them to take action to ensure people with mental health problems have the support and information they need to build savings and to avoid financial hardship when they reach retirement age. That includes reviewing the design and promotion of pensions information to ensure it’s inclusive and can be accessed via multiple communication channels. 

D’Arcy added:“We also want to see pension providers improve their support for people who may be making crucial decisions while unwell, for example by providing extra support to help them make informed decisions and introducing checks and balances to minimise the risk of financial harm later down the line.”