One in four taking more risks with money

Research by the Financial Services Compensation Scheme (FSCS) has found that one in four (26%) of savers are taking more risks with their money in an effort to land bigger returns amid the cost-of-living crisis.

A poll of 4,000 adults saw 23% of consumers with a pension say they have either decreased the percentage they contribute or stopped contributing to their pension entirely over the past few months. With interest rates and inflation soaring, the FSCS found that of those eligible to draw on their pensions.

As 29% of those eligible to draw on their pensions move money out to cover day-to-day expenses, and a further 17% opt to invest this money elsewhere.

For more than a year now, the UK has experienced a period of rising prices, commonly referred to as the cost of living crisis, as ‘real’ incomes, when adjusted for inflation, have continued to fall since late 2021. With inflation hitting a forty-year high last October, and interest rates hiked up in response, consumer’s short and longer-term financial decisions are being impacted as people seek to make their money go further.

Lila Pleban, Chief Communications Officer of FSCS said “Claims involving pensions and investment advice are now the most common claims that FSCS receives and are often the most complex and costly to resolve. Understanding what consumers are doing today in response to current economic conditions can help us predict what may land at our door in the future, supporting us to find effective solutions that can protect consumers and prevent financial harm.”

“When money is tight, it’s inevitable that alongside compromises and budget planning some people are likely to take more risks, which could plunge them further into financial difficulties. Whatever consumers choose to do with their money, it’s important they understand if and how their investments are protected. Sharing knowledge and insights across the industry can help consumers make informed decisions about their finances so they can feel confident their money is safe.”