According to research from the Financial Services Compensation Scheme, 23 per cent of consumers with a pension have either decreased the percentage they contribute or stopped contributing to their pension entirely over the past few months.
The FSCS conducted research with 4,000 UK adults between September 2022 and February 2023.
It found that 6 per cent of those with a pension who have not made any changes to their contributions over the past few months expect to either decrease the percentage they contribute or stop contributing to their pension entirely in the next six months.
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.”
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 40-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.
The FSCS research found that of those eligible to draw on their pensions (age 55+), 29 per cent have moved money out to cover day-to-day costs.
A further 17 per cent have opted to move money from their pensions to invest elsewhere over the past few months.
Pleban said: “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."
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