What role does psychology have to play?

Psychologists have always known that the way to shift behaviour is to tap into a person’s ‘hopes’ and ‘fears’, as even though there may be perfectly rational reasons why behaviour needs to change, a person’s emotional response will be the strongest ‘driver’ of all.

Our hopes represent the positive, upbeat side of ourselves, driving us on to realise personal ambition and achievement. Our fears reflect the negative, downbeat, ‘what if?’ side, the obstacles that may keep us from realising our dreams.

‘Hope’ and ‘fear’ are two sides of the same coin. Helping one side also affects the other side in the opposite way. So, as anxiety is lessened, hope will automatically increase, bringing with it the added bonus of a sense of control over one’s own life.

To be able to better serve the Retirement Nation we need to understand them, and to understand their hopes and fears about retirement.

The different personality types

We have identified six different personality types within the Retirement Nation. By studying these groups, this will help us as a society to develop our understanding about the hopes and fears of the Retirement Nation.

Split of the groups

Below you can see the split of these six groups in the UK. The largest group is the Comfortable type. Most people are trying to keep up the living standards in retirement that they enjoyed in working life. But it’s a struggle. They need to be aware of money and careful with their budgeting. They have worked hard for their retirement and can enjoy a few occasional luxuries. But they are keen not to have to rely on others in later life – not the State, and certainly not their family.

These groups, however, are not static. We do not expect the same split of types in the UK Retirement Nation in, say, 10 or 20 years’ time. As fewer people reaching retirement are benefiting from defined benefit pension scheme membership, we expect more people to fall into the categories with less retirement income, where budgeting is more of a concern.

Type ‘hoppers’

People do not necessarily remain in the same group for the whole of their retirement. For example, someone could start off in the Thriving group, but due to ill-health, could fall into the Aspiring group, where they may have the funds to live a full retirement but not the health to enjoy it. Likewise, someone in the Careful category may receive an inheritance or windfall meaning they move to the Comfortable category, and are able to splash out from time to time. The reason people fall into one category or another could depend on their environment, their health, events in their lives, but also their general attitude. Some people are prone to worry more than others, and therefore fear their money will run out or their health will fade.

The financial services industry can also help people move group by giving them the financial security of a stable retirement income that can help guard against risks like inflation, as well as making sure people start off with the highest retirement income possible by shopping around.

15% – ‘Thriving’

Has both the money and good health to really enjoy retirement, and to do the things they have always dreamed of.

This person is quite happy with the pension and investment portfolio they have built up for their retirement. He or she is financially-savvy, shrewd, forward-thinking and organised and knows how to “play the system” to their advantage. Providing their health holds up, they believe anything is possible and they plan to live better in retirement, because they now have the free time to match their income. They plan to indulge more time and energy on their hobbies, spending time with family and travelling.

15% – ‘Aspiring’

Dreams of a better life in retirement but may not be able to achieve it as money hasn’t performed as well as hoped, or health problems may cut down their ability to travel and enjoy hobbies.

People in this group are dynamic, hard-working and highly motivated. They want to have a high standard of living in retirement, and they have a good understanding of their financial options. However, they may have a smaller pension or investment portfolio than they expected or hoped for and there may be a gap between what they want to do and the funds to do it. They may be forced to, or choose to continue working – in a reduced capacity or bursts of employment – to fund the lifestyle they want. They may have health problems which will frustrate their ability to earn more money to help them lead the retirement life they dream of.

15% – ‘Comfortable’

Enjoys good health, and has enough money to maintain the same lifestyle in retirement, as well as treat themselves and their family occasionally.

This person expects to have the same lifestyle in retirement using the decent pension and savings they have built up through planning ahead. But they also expect to have to be careful with money. They don’t have overly-ambitious plans for retirement, but want to devote more time to family, hobbies and voluntary work. They are conservative, moderate, organised and practical. They do have the money to be able to ‘splash out’ occasionally, for example on an extra holiday. They have done some financial homework, but some will still be unclear about their financial options.

13% – ‘Careful’

Independent, self-sufficient, and wants to keep the same lifestyle in retirement, but the modest pension, investment and equity they have built up over their working lifetime makes this tough.

They would like to keep the same lifestyle they had before they retired but they feel the size of their pension funds and savings will make this difficult. They probably own their own home and have equity in their property. People in this group have probably experienced times when work was plentiful and they’ve been able to save money but in recent years, employment and income has been more like a roller-coaster ride. Independent and self-sufficient, these people will always find a way to survive the hard times, providing their health holds up. They worry about being able to leave some money to their children and grandchildren.

20% – ‘Squeezed’

Income will be less in retirement because of low savings, and they may have to continue working if their health allows.

This group expects to see their standard of living fall in retirement. Their retirement income may not be large enough to cover the things they planned to do, or they may worry it won’t last the whole of retirement. Although thrifty, self-sufficient and good at budgeting, they aren’t good at taking the long view and have limited understanding of their retirement options. They may want to carry on working to supplement their income, but health problems may not allow them. This group desperately don’t want to become financially dependent on their families in their old age.

8% – ‘Restricted’

Mainly dependent upon the State and possibly family for financial support, they have to budget very carefully and cannot plan ahead.

This group know they will see a drop in living standards in retirement, and will be mainly dependent on the State with little private savings. They may also have to turn to family for financial support which adds to their anxiety. They would like to carry on working, but health problems or lack of opportunities probably won’t allow them. Although they are used to cutting back, doing without, finding bargains and stretching the pennies, it’s difficult for people in this group to look far ahead. They take each day as it comes and try to enjoy the things that don’t cost money, like watching TV or spending time with friends and family. Although they budget well, they can’t see a way to improve their financial situation and are anxious about the future.

For Chapter 5 and more on how can we help the Retirement Nation please read more here.

For the complete Retirement Nation report please download Our Retirement Nation 2011 (1.6mb)

Go back to the Retirement Nation homepage here

¹ Note: Retired population only. Source: MGM Advantage, Retirement Nation survey, October 2011 and Donna Dawson, Psychologist