While the government debates scrapping Winter Fuel Payments to save taxpayers £1.4 billion, a far larger issue is being ignored—the rise of mental health issues among university graduates, which is costing taxpayers over ten times that amount.
The conversation has centred too long on the financial burden pensioners place on taxpayers, when what we really need is to shift our focus towards supporting all generations who are economically inactive, helping them regain both productivity and wellbeing.
The focus on cutting pensioner benefits, instead of addressing the growing mental health crisis, highlights how both the government, and the financial services industry, are obsessed with financial capital, neglecting the critical need for human capital development.
If we shift our focus to supporting mental health and personal development, we can not only reduce tax deficits and long-term economic inactivity, but also create a healthier, more productive society for everyone.
This week, the vote on scrapping automatic Winter Fuel Payments for pensioners has sparked a wave of opposition. Rachel Reeves’s surprising decision to restrict winter fuel payments to only those on pension credit will impact about ten million older people, costing each up to £300 while saving the Treasury £1.4 billion. Keir Starmer, Leader of the Labour Party, defended the move, acknowledging the “£22 billion black hole” in the public finances and admitting that tough, unpopular decisions are necessary. But is cutting essential support for older people the only way to tackle budget shortfalls?
There’s a significant challenge brewing at the other end of the working life spectrum. Long-term sickness has driven a sharp rise in economic inactivity. A record 2.8 million people are now off work due to long-term health issues—a number that’s grown by 700,000 since the pandemic. The cost of sickness benefits is projected to reach £64 billion by the end of this Parliament, an increase of £30 billion since before the pandemic.
Tackling this issue head-on could provide tremendous savings. A recent report from the NHS Confederation and the Boston Consulting Group found that even partially reversing the impact of long-term sickness could save taxpayers £19.5 billion annually by the end of the decade. More importantly, the boost to the wider economy could be as high as £62.6 billion. But the question remains: how do we address mental health issues while supporting the economically inactive to become active again?
The answer lies in holistic financial planning.
Holistic Financial Planning: A Route to Wellbeing
Holistic financial planning doesn’t just focus on finances—it’s about the whole person: mind, body, heart, and spirit. At its core, this approach understands that mental, emotional, and physical well-being are deeply intertwined with financial health. A McKinsey report highlights that wellness, wellbeing, and a sense of purpose (or significance) are the ultimate goals, with financial planning acting as the means to achieve them.
This broader view of wealth incorporates two key components: financial capital (our savings and assets) and human capital (our future earning potential). According to the CFA Institute, both are crucial for long-term wellbeing. Yet, the traditional financial services industry, and lobbied MPs, tend to overlook human capital because it’s incentivised to focus on managing financial capital. By removing those narrow incentives, we open the door to a more holistic approach that equally values both.
For many of today’s university graduates, this imbalance is stark. They enter the workforce burdened by mental and financial anxiety, carrying a large financial capital deficit, rich in human capital but often ignored by the current system. Financial stress directly contributes to mental health challenges, making it no surprise that an increasing number of students transition from university straight into long-term sickness, as recent studies show. When earnings and financial capital is lacking, financial anxiety adds to the mental strain, worsening an already challenging situation.
How Human Capital Development Can Drive Change
To tackle these complex challenges, we must raise awareness of the importance of human capital development. By nurturing future earning potential and creating an environment where financial wellbeing and mental health are supported together, we can make significant strides in reducing economic inactivity and improving overall societal wellbeing.
In this context, universities and employers play critical roles. Early mental health support, skills development, and personalised financial planning can help those at risk of long-term sickness get back on track. As Matthew Taylor, CEO of the NHS Confederation, points out, “the health service cannot solve the problem alone.” We need a joined-up approach across government, education, health, and employment sectors to help individuals develop the resilience and skills they need to thrive.
A Call to Action: Holistic Financial Planning for a Brighter Future
The UK stands at a crossroads. We face immense challenges in both supporting older generations and addressing the growing number of economically inactive individuals due to long-term sickness. But with these challenges come opportunities. By embracing a holistic financial planning approach, we can help individuals and communities build financial security while supporting mental and emotional wellbeing.
It’s time for a paradigm shift. Let’s move away from policies that treat financial capital as the sole measure of wealth and instead adopt a broader perspective that values human capital, purpose, and wellness. By doing so, we can create a healthier, more resilient society—one where every individual has the opportunity to contribute, thrive, and enjoy financial and emotional security.
Together, we can build a future where wellbeing, not just wealth, is the ultimate goal.
Questions & Answers
Q: Why is the government considering scrapping Winter Fuel Payments for most pensioners?
A: The government is facing a significant budget deficit—an estimated £22 billion. To help manage this, they’ve proposed limiting Winter Fuel Payments to only pensioners on pension credit. While this move is expected to save £1.4 billion, it means that around ten million older people could lose up to £300. It’s a tough and unpopular decision, but leaders feel it’s necessary to balance the books.
Q: How does this issue relate to the growing problem of economic inactivity due to long-term sickness?
A: Just as the government is grappling with cuts to pensioner support, there’s a massive challenge with economic inactivity among working-age people due to long-term sickness. Since the pandemic, an additional 700,000 people have been forced out of work because of health issues, bringing the total to a record 2.8 million. This growing trend is costly, with sickness benefits expected to rise to £64 billion by the end of the current Parliament. Addressing this issue is crucial to the health of both individuals and the economy.
Q: How can holistic financial planning help with long-term sickness and mental health issues?
A: Holistic financial planning takes a big-picture approach to wellbeing. It doesn’t just focus on financial health but also considers mental, emotional, and physical wellbeing. By focusing on both financial capital (your savings and assets) and human capital (your ability to earn in the future), this approach helps you plan for a balanced and fulfilling life. Supporting people with personalised financial planning and mental health resources can make a huge difference, helping them regain their financial independence and improve overall wellbeing.
Q: What’s the connection between human capital development and reducing economic inactivity?
A: Human capital development is all about building your future earning potential—whether through education, skills training, or career development. When people are supported in developing their human capital, they’re more likely to stay active in the workforce and less likely to suffer from long-term economic inactivity. By investing in mental health support and skills development, we can help people stay engaged, productive, and financially secure, which also benefits the wider economy.
Q: Why are students such a big part of the rise in long-term sickness?
A: Many students, especially in the post-Covid era, are facing unprecedented levels of stress and mental health challenges. They often graduate with high levels of anxiety, mentally and financially, with financial challenges compounding mental health problems. Without the right support, these graduates can struggle to transition into the workforce, leading to long-term sickness and inactivity. It’s crucial that universities, employers, and financial planners work together to provide early mental health support and financial guidance.
Q: What role can holistic financial planning play in supporting young people?
A: Holistic financial planning can make a world of difference for young people, particularly those entering the workforce during challenging times. By focusing on both financial education and emotional wellbeing, we can help young adults manage financial anxiety, build healthy money habits, and develop the resilience needed to thrive in their careers. This approach supports them in realising their full potential—financially, emotionally, and professionally.
Q: What can be done to address the economic inactivity caused by long-term sickness?
A: To tackle this issue, we need a coordinated effort. This includes early mental health support, holistic financial planning, and a greater focus on developing human capital. By nurturing people’s future earning potential and supporting their overall wellbeing, we can help them return to the workforce. This doesn’t just benefit individuals—it also strengthens the economy, creating a win-win situation for everyone.
Q: How can we support people through holistic financial planning?
A: At its core, holistic financial planning is about more than just money. It’s about creating a balanced, fulfilling life by focusing on wellbeing in all areas—financial, mental, emotional, physical, and spiritual. By providing accessible financial planning, personalised advice, and mental health support, we can empower people to take control of their future. Whether you’re worried about your financial situation, your career, or your health, a holistic approach ensures you have the tools and support needed to build a secure and happy life.
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