insight
Evidence type: Insight i
Qualitative research is more exploratory, and uses a range of methods like interviews, focus groups and observation to gain a deeper understanding about specific issues - such as people’s experiences, behaviours and attitudes.
Quantitative research uses statistical or numerical analysis of survey data to answer questions about how much, how many, how often or to what extent particular characteristics are seen in a population. It is often used to look at changes over time and can identify relationships between characteristics like people’s attitudes and behaviours.
The cost-of-living crisis affects everyone to an extent, but people who have low financial resilience – around a quarter of people in the UK - are likely to be the most severely affected and could be struggling to manage their finances. When money is tight, some people are likely to take more financial risks, which could plunge them further into financial difficulties. This report focuses on the impact of the crisis on consumers’ behaviour towards their pensions, because disruption to pension savings could have consequences for retirement income plans. The most common claims for compensation that the Financial Services Compensation Scheme (FSCS) receives are about pensions and investments – these are also the most complex and costly to resolve. The report also touches on other areas such as savings, credit and budgeting.
The FSCS is an independent body, funded by the financial services sector, which pays out compensation when financial firms go out of business. The goal of the research is to help FSCS and stakeholders across the financial services sector to identify gaps and opportunities to provide consumers with accurate information about FSCS protection. In particular, because of the lag between the consumer getting advice and making a claim for compensation, this research is important for the FSCS in helping understand what claims are likely to arrive in the future as a result of the cost-of-living crisis and how consumers behave towards their pensions.
The data in the study comes from a brand tracking and consumer research survey, which is conducted monthly by FSCS in partnership with research company The Nursery. Research was carried out by research company Dynata among 4,479 UK adults aged 18+, ranging from 602 to 1,432 per month, between September 2022 and February 2023.
The increased cost of living and rising energy and fuel prices are the top financial concerns among people, many of whom are being impacted by high inflation for the first time. Consumers are taking action in how they manage their finances in response to higher prices and a squeeze in their real incomes. A quarter (26%) of respondents say they are taking more risks with their money to gain a better return.
People are also adjusting contributions and making other decisions about their pensions, with some of those eligible opting to access their pots as a result of the cost of living crisis. Some are now having to make difficult decisions where their short-term needs are at odds with their long-term goals and retirement plans. Almost a quarter (23%) of those with a pension have either decreased the percentage they contribute or stopped contributing to their pension entirely over the past few months. And 6% of those with a pension who haven’t made any changes to their contributions over the last few months expect to either decrease stop contributing to their pension entirely in the next six months.
Of those eligible to draw on their pensions (age 55+), 29% have moved money out to cover day-to-day costs. A further 17% have opted to move money from their pensions to invest elsewhere over the past few months. In the next six months, 17% of those eligible are likely to move money out of their pension to cover day-to-day costs, while 12% are likely to do so to invest it elsewhere.
