The FSCS survey of 4,000 consumers also found that many are making more risky investment decisions to try to keep up with inflation.

Key findings from the report also reveal:

• 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
• Some 29% of those eligible to draw on their pensions are moving money out to cover day-to-day expenses and a further 17% are opting to invest this money elsewhere
• 6% of those with a pension who have not made any changes to their contributions over the last few months expect to either decrease the % they contribute or stop contributing to their pension entirely in the next six months

The FSCS surveyed adults between September 2022 and February 2023 to find out how the cost of living crisis was affecting them and their decision making.

The survey found that pensions are being affected significantly by changing consumer behaviour with 23% of those with a pension decreasing or stopping pension contributions in the past few months.

The FSCS says its new report highlights the importance of raising awareness and understanding of how pensions and investments are protected to prevent future harm.

The FSCS decided to conduct a study as inflation soared to a 40 year high and interest rates spiked amid signs that consumer's short and longer-term financial decisions are being impacted.

Lila Pleban, chief communications officer of the FSCS said pensions and investment claims are the most common claims the FSCS receives and they are “complex and costly” to resolve.

Ms Pleban said: “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."

The full report is on the FSCS website: FSCS Consumer Research: Impact of rising cost of living on finances and pensions.

• Figures come from FSCS brand tracking and consumer research survey, which is conducted monthly by FSCS in partnership with The Nursery. Research was carried out by Dynata among 4,479 UK adults aged 18+, ranging from 602 to 1,432 per month, between September 2022 and February 2023.