Pension providers have been urged to take action to improve outcomes for consumers with mental health problems, after research from the Money and Mental Health Policy Institute revealed that poor mental health can lead to people saving less into their pension.

The research outlined a range of challenges people with mental health problems can experience when planning for retirement, warning that existing services are not meeting the needs of people with mental health problems - despite recent efforts to improve the accessibility of information and services.

In particular, the research highlighted problems with the design and promotion of services that are creating practical barriers for people with mental health needs.

For instance, the research pointed out that many people with mental health problems can struggle to navigate communication channels like using the phone or digital journeys.

In addition to this, it found that many people with mental health problems, particularly those with low levels of savings, feel that the existing guidance and information around pensions does not reflect their experiences and gives the impression that retirement planning services are ‘not for them’.

The analysis of the Financial Conduct Authority’s (FCA) 2020 Financial Lives Survey revealed that, among people age 45-64, over a quarter (27 per cent) of people with mental health problems did not know they had to choose how they will take money from their pension, compared to 16 per cent of those without mental health problems.

In addition to this, more than half (51 per cent) said that they do not understand the options for taking money from their pension, compared to almost 36 per cent of those without mental health problems.

Furthermore, just under a fifth (17 per cent) reported having a clear plan about how to use their pension, which the Money and Mental Health Policy Institute pointed out was, again, less than those without mental health problems (25 per cent).

Alongside these concerns, the report warned that people are often making critical decisions on their pensions savings while acutely unwell, and without the right support from services.

Indeed, the survey, which gathered views from 272 people with mental health problems, highlighted stories of individuals who 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.

In light of the findings, the institute has urged 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.

In particular, it emphasised the need to improve the design and advertisement of pensions information so it’s more inclusive for people with mental health problems - as well as providing training for staff about the additional barriers this group might face.

It also called on pension providers to take steps to improve their understanding of how to support people whose capacity may fluctuate, including developing routine checks and balances, and being proactive in encouraging customers to disclose their mental health problems.

The Money and Mental Health Policy Institute confirmed that it will also look to publish a best practice guide for pension providers, setting out practical steps they can take to improve the accessibility of pensions information and guidance for people with mental health problems.

Money and Mental Health Policy Institute interim chief executive, Conor D’Arcy, stated: “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.”

“As the FCA’s Consumer Duty comes into force in July, we’re calling on firms 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 information around pensions to ensure it’s inclusive for those of us with mental health problems, and that it can be accessed via multiple communication channels.

“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.”

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