Study claims pensioners lose their ability to solve financial problems

• Harvard University academics said performance declines in mid-50s
• Half of those in their 80s have serious impairment to financial decisions
• It follows separate research finding similar trend in men over 64

By Louise Eccles, Business Correspondent for the Daily Mail

Published: 20:15 EST, 30 November 2014 | Updated: 05:55 EST, 1 December 2014

Shock: Our ability to deal with a financial crisis may reduce as we get older (picture posed by model)

Our ability to make sound financial decisions peaks at 53 and then declines, a study claims.

Academics at Harvard University said cognitive performance declines in the mid-50s because we lose our ability to solve new problems.

It also warned that by the time pensioners reach their 80s, half will have serious cognitive impairment which renders them unable to make good financial choices.

There was bad news for the young too – they may also struggle to make an important decision about their money because they do not have the financial knowledge acquired through experience.

It follows a recent study by the Money Advice Service which found that one in five over-55s could not choose the better deal from two financial products.

Separate research by the English Longitudinal Study of Ageing found men’s memory remained stable until they reached 60 to 64, after which it declined.

Ros Altmann, the Government’s older workers champion, who also studied at Harvard, claimed the latest research was ageist.

‘Everybody is different so there is no point in making stereotypes,’ she told the Telegraph. ‘There are plenty of people in their 80s who are still very mentally capable.’

The study is particularly timely because millions of people aged over 55 will soon be able to withdraw their entire pension and spend it as they wish as part of radical Government reforms.

With new freedoms come new responsibility though, as they decide whether to take the money in one go, in several parts or buy an annuity, a guaranteed income for life.

Problems: Pensioners are given little let-up in their financial worries as the years wear on (posed by model)

The Government-backed workplace pension scheme Nest said pension firms should allow customers to put in writing what they want to do with their pot well-ahead of their actual retirement.

Mark Fawcett, at Nest, said that people should plan what to do with their nest egg in their 50s when their mental capacity to manage money is in a ‘sweet spot’.

There are no products that allow this kind of forward-planning yet.