Do we need to be stressed into saving for the future?

Should we be stressed into saving for retirement?

The link between money worries and mental health is clear. Day to day financial issues take an enormous toll on our emotional and mental wellbeing, and one in six people have suffered mental health issues as a direct result of money concerns. However, a new piece of research suggests that adding a bit more stress could be useful for some people. How could that possibly be the case?

SEE ALSO: Will your pension savings last as long as your retirement?

See also: High earners 'can expect relaxing retirement but stress rises for lower paid'

See also: Older workers 'struggling to save for retirement'

The research has been released by Scottish Widows as part of Mental Health Awareness Week. The company takes the link between money worries and mental health very seriously. It found that nearly half of people say financial worries regularly impact their personal relationships and affect their ability to sleep, with one in ten having their sleep hampered nightly.

It doesn't for a minute suggest adding to these people's challenges by stressing them out even more, because the last thing people need when they are in this position is another worry.

Who needs more stress?

However, for those who have a balance in their current financial situation - and are not suffering sleepless nights - its research found that raising their stress levels slightly for three minutes could benefit them in the long run.

Behavioural psychologist Jo Hemmings observed volunteers aged between 35 and 45 as they watched films illustrating two opposing retirement situations. The first film painted a happy picture of retirement, while the second film drove home the financial hardship and unhappiness of poverty in later life. Wired up to oximeters that measured their pulse rates, the scientists monitored signs of relaxation and stress, including facial movements and body language.

An overwhelming majority of participants demonstrated clear signs of stress, including body twitching, uncomfortable fidgeting, crying and increased pulse rates, while watching the video highlighting the effects of not having adequate money for retirement.

After watching the films, the researchers asked the volunteers about their own retirement savings, and 78% said that the video had made them worried about how much they were saving towards retirement and their own financial prospects later in life.

But what was most surprising was that it took just 3.5 minutes of footage to make 90% of participants say they would review how much they are saving towards retirement. On average, the impact of the video resulted in participants pledging to increase their monthly pension contributions by an average of between 2-5%.

Hemming said: "This kind of situation suggests that prior to the experiment the vast majority of participants had given little or no consideration to the financial reality of their retirement. Yet the stress they demonstrated showed that they did identify with aspects of the film they watched, and this created fear that it would become their reality unless they took action to do something about it."

"Denial of a situation that feels too distant in the future can create a false sense of security that prevents people taking action to resolve it. This is certainly true of retirement planning. The purpose of putting money away for a distant older life can feel too abstract and unreal in younger life and can therefore be ignored. But this study shows that the smallest injection of reality, in this case a short video, can change people's priorities and mind-set."

What can you do?

Scottish Widows suggests, therefore, that anyone who feels sufficiently on top of their day-to-day finances should take the time to consider the future. You can start by visualising your ideal retirement – what do you really want to do or get out of retirement and how much money will you need to set aside to cover it? Then use financial calculators to understand what your pensions savings may translate to in the form of a weekly income in retirement – and assess whether you are saving enough.

If you need to save more, it's worth reviewing your current income and outgoings, to see whether there is any room to put more money away for the future. That way you can increase your monthly savings to the kind of level you need for the retirement you want.

Of course, even once this is done, it's essential to revisit your plans regularly to ensure you are still on track, and if you have any concerns about making a big decision like this on your own, seriously consider a consultation with a financial adviser to get you on the right track in plenty of time.

How we spend our pensions
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How we spend our pensions

Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.

A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.

Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.

Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.

Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.

A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement

Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.

Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.

Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.

The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.

While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.

Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to - because while baby boomers know how to have fun - they also know how to save for the future.


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