An estimated 1 in 6 people in the UK has a mental health condition and there is a large amount of evidence showing that individuals with poor mental health have lower income over their lifespan. Previous research has shown that workers with poor mental health were much less likely to take part in company pension schemes, potentially leading to a disadvantage later in life, as lack of pension savings can mean an increase in financial hardship.
In 2012 the UK Government changed pension policy so that workers are automatically enrolled in their workplace pension scheme. This has had an impact on workers with poor mental health, as new research shows they are now just as likely to participate in their company pension work scheme as their colleagues without mental health issues.
The research led by Karen Arulsamy, from University College Dublin, and Liam Delaney, from London School of Economics, follows the wellbeing and financial habits of participants in Understanding Society from 2012 to 2018. They measured mental health using the General Health Questionnaire (GHQ-12), a commonly used tool for measuring psychological distress, and focused their analysis on employees in private companies. Prior to automatic enrolment, they found that men with poor mental health were 3.7 % less likely to participate in a workplace pension scheme, while women employees with poor mental health were 2.9 % less likely.
The graph below shows pension participation rates by baseline psychological distress in Wave 1 for private sector employees.
The study uncovers the success of the policy – removing a barrier to participating in pension savings for many people with mental health issues. When the researchers looked at general financial saving behaviour they found that the amount saved by men with poor mental health also increased after automatic pension enrolment, but there was a decrease in saving for women workers.
The authors said: “If individuals with poor mental health are less likely to participate in a workplace pension plan, they will have less income and consequently less financial security in retirement. The implementation of automatic enrolment completely removes the mental health gap in pension participation, equalising the pension participation rates of individuals with and without poor mental health in the private sector.”
