Financial distress in later life

At the Money and Mental Health Policy Institute, we have heard worrying stories about ways in which older people with mental health problems can more easily fall into financial distress in later life than others. Older members of our Research Community, a group of 5,000 people who have had experience of mental health issues, have told us about the difficulties they have had in securing a comfortable income in later life.


Problems putting into the pension pot

Squirreling money into a pension pot whilst earning is a classic way for people to fund a comfortable lifestyle in later life, in conjunction with a state pension. Government exhorts us to save, most recently compelling employers to offer staff a workplace pension and to make contributions. However, in the end, the main factor that determines the value of a pension is how much you pay in – and that, in turn, depends significantly on how long you work for and how much you earn.

People with mental health problems are less likely to be able to sustain work over the long term. Many have fluctuating conditions that mean there are times when they can work and times when they can’t. 


Around 300,000 people with a long-term mental health problem lose their jobs each year.


This is a much higher rate than those with physical health conditions and far more than those without any health problems. The result can be a smaller pension pot and insufficient contributions for a full state pension.

Making decisions about pensions whilst experiencing mental health problems

Finally, a number of our Research Community members reported retiring early because of their mental health problems. Whilst this may be the right decision from a health point of view, it may not be from a financial one. 



Before I was diagnosed with severe clinical depression 11 years ago, at age 50, I was working at the top of my profession, but one of the most serious aspects of my illness was that I lost my entire business memory and ultimately could not even read a page of The Sun and absorb the content. I had to leave my job and have never been able to work full time again. In my industry, anyone over 50 struggles to get employment


Research Community member

Separating retirement from drawing down a pension

When we think of retirement, we usually mean stopping work and starting to draw down pensions. However, the two need not happen at the same time. It might be better to delay starting a pension. A complex set of factors, including other assets, benefits entitlement and individual pension scheme rules (which vary considerably and are often difficult to understand at the best of times) should be considered. 

And yet, people experiencing a period of mental ill health can be faced with making this difficult decision at precisely the point they are least able to do so. Mental health problems commonly affect our cognitive and psychological functioning, as we explain in our report, Seeing through the fog. Difficulties include:

  • Impaired understanding
  • Problems remembering information
  • Lack of concentration and 
  • Reduced clarity of thought
  • Difficulties with reasoning and judgement. 

With all of this going on, it’s no wonder people experiencing mental health illness find it hard to make good decisions about their finances at these times. There is a very real risk that they could end up making a decision that could deprive them of thousands of pounds of income in the future and lead to a much poorer old age.


After I’d been off sick for 12 months, I was then offered early retirement on health grounds, which I took. I guess the longer-term impact was that I retired at 50, and that has had a massive impact, obviously, on my pension and an impact on what my pension might have been.


Research Community member

Policy solutions

So what can be done to help? We have explored a number of potentially helpful interventions in our In control report, such as:

  • Allowing people a pause before enacting a major financial decision
  • Alerting a third party, for example a carer or named next of kin
  • Requiring the person to re-confirm big decisions.

All of these could protect people with life-changing financial decisions, which they are too unwell to make, from a reduced income in later life. 

Over the longer term, Money and Mental Health want to work to ensure people with mental health problems have substantial incomes throughout their lives. To that end, we are currently looking at the financial impact of taking time off work because of mental health issues and will be publishing a report of our research in the autumn. 


Rachel Braverman is the Research Officer at the Money and Mental Health Policy Institute

Have you been affected by any of these issues?

If you have been affected by any of the issues described in this blog, or simply need someone to reach out to, you can call the Mind helpline for information and advice on 0300 123 3393, or text 86463.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the policy or position of Independent Age.