The Financial Services Compensation Scheme says its research has identified a worrying trend, in that many retirees are prepared to consider higher risk investments in an attempt to boost their returns, even though doing so also exposes them to a greater chance of loss. It says that this may be due to the continuing low-interest savings environment.
20% of the people aged between 55 and 75 who were surveyed suggested that they were prepared to adopt this strategy and were tempted to review high-interest investment products that they would not usually consider.
It’s also concerning that many people seem prepared to invest in high-risk areas without taking advice as to whether this is appropriate for their circumstances. The FSCS research identified that just 12% of retirees have consulted an independent financial adviser.
The research found that 36% of respondents had invested their money after their retirement. 69% were aware of the existence of the FSCS, and that this organisation offers some protection to consumers, but only 36% were aware of the level at which FSCS compensation is capped. The Service says this shows investors are exposed to potential losses, were their firm to go bust while they had more than the FSCS limit invested.
Caroline Rainbird, FSCS’s CEO, said:
“We are seeing increasing numbers of customers seeking compensation from FSCS due to failed pension and investment products, or poor advice.
“The real danger is that if consumers choose to put money into high-interest pension and investment products that are not FSCS protected, they could lose life-changing sums of money from their retirement pots if the product provider fails.
“For peace of mind, consumers should always check that new or existing pensions and investments products are FSCS protected. Our website, www.fscs.org.uk, offers guidance on how to check for FSCS protection, including our new Pension Protection Checker tool and investment protection explainer video.”