It’s estimated that around 35% of the British workforce do not have a pension and this is despite the UK having an auto enrolment regime for those in employment. Additionally more than 20% of the over 50’s have no private pension savings and are dependent on the state pension. For those that qualify for the maximum state pension this means they will have £9,109 to live on per year, a far stretch from a comfortable retirement.

None of us want to live out our golden years in a tarnished state so why can’t we get our act together to do something about it now?

Beside the challenge of having to defer our spending today for some difficult to imagine future, science has uncovered the reason why we find it difficult to save for retirement and it boils down to how our brains are wired.

Early humans developed the mechanisms within their brain that sense and avoid danger or maintain life and over time as we advanced these became automatic and unconscious to enable us to react quickly when faced with challenges. As a result of the unconscious nature of these reactions, they have continued to reside within the prehistoric portions of our brains.

As we have evolved we have develop further cognitive biases, those mental shortcuts that result from our brain’s attempt to simplify information and the messages behind what we perceive.  These biases are often based on errors in how our brain interpreted an event or occurrence. The brain is a giant computer but it can only interpret based on the data it has gathered from events it has previously encountered or on others reactions to that event. This doesn’t necessarily result in a logical or accurate interpretation.

The following are 3 cognitive biases that particularly create challenges for us when it comes to saving for the future and especially for that distant retirement.

The Optimism Bias


This bias causes us to overestimate the probability that good things will happen and underestimate the probability of negative events.

This can lead to us taking suboptimal decisions which impact our future,  spending more than we earn now, getting into debt and trusting that somehow it will all work out in the future.

The bad news, research has shown over optimism is difficult to reduce. On the positive side, over optimism can create a sense of excitement and anticipation for the future and if we are able to focus on that and build an enticing vision around our goals and why it is important to save and invest now, this bias may in fact build our motivation around achieving these goals

The present bias

You have the choice – £1000 now or £1500 in a year. Which would you choose?

Most of us would choose the £1,000 now. This is driven by our present bias, our tendency to choose a smaller sooner reward now rather than waiting for a bigger reward in the future.

This is one of the biggest obstacles to saving for retirement as we add more value to money now than in the future.

Research has shown that present bias has a lot to do with fear of a positive outcome not being achieved in the future as opposed to the certainty of now and disassociation with our future selves.

Frankly we don’t spend much time thinking about the future us and as a result we haven’t developed a close enough relationship with this vague person to really care about their wellbeing.

In order to give more positive weight to the future we need two things. Certainty and emotional connection to our future selves.

Certainty seems the harder ask of the two given that the world is an uncertain place, but by establishing a roadmap, a framework for what we need to do and the anticipation and excitement for the outcome we are certain enough to proceed.

When we are going on an exciting journey as long as we know the steps we need to take to get us to our destination we don’t worry overly about how the situation may change. We know we pack our suit case, arrange a cab, get to the airport check in, catch a flight and hello we are in our dream destination. The reality is it doesn’t always work as smoothly as that but we are willing to take that risk because of the excitement of the journey.

Our future planning can work on the same basis. Get to know your “destination”, i.e. who you want to be at that future time, what you want to be doing, what you are going to need and what will make you happy. Generate excitement around this future place. Then consider not reaching this destination imagine how you will feel, what you will have to sacrifice and how life will be if you cannot do the things you just imagined. Build on your fear of missing out. Finally lay out a roadmap for what you need to do to reach that destination and take action.

James Clear, the author of my favourite book of all time “Atomic Habits” has written an excellent article, “Time-Inconsistency”, around beating the Present Bias Trap, it is very actionable read and can further help to spur action.

Loss Aversion Bias

Our fears around losing means we would rather forego the potential to get more than take the risk of losing what we have. We have all heard the saying, “a bird in the hand is worth two in the tree”.

Humans are coded to negativity, it is what kept us safe in the wild after all. As a result we feel stronger about losing £10 than we do about gaining £10.

This fear fuels our unwillingness to risk investing for the future and as a result makes us take disempowering actions like spending our money as opposed to building our assets through investment.

The counter to this bias is firstly to recognise that we have it. Next we need to gain a full understanding of our motivations and fears around taking this perceived risk, and armed with this insight to contradict or mitigate our beliefs and fears through knowledge, fact and education. The ultimate way to get out of the inertia of fear is to take action. Empowered with our awareness of self and education around investing we have no further excuses to hold ourselves back.

A successful retirement is created by having a plan, taking action early and consistently building assets over time. Understanding what might get in the way of us doing this and building a framework to overcome obstacles both internal to us and external to the environment creates certainty within our belief system that our goals are achievable no matter what we encounter.

Want some help creating a vision of your dream retirement? Grab the life vision and goals worksheet .

Hey there!

Michelle here,

You want to become financially independent and grow your wealth?

You are in the right place.

I help women build their financial intelligence. This means we talk money, earning it, saving it, investing it and growing it.


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