People who are aware of the FSCS are also more likely to seek financial advice and are less likely to question the cost of that advice. The FSCS found a reliance on financial advisers overall, with 64% of women and 54% of men using an IFA to help them buy a retirement product with their pension pot.

The FSCA today published findings from a ‘large-scale experiment’ showing that people’s appetite for risk – and choice of retirement product – could change, when they know or hear about FSCS.

It found that people who are aware of FSCS are “less inclined” to buy riskier products and more inclined to opt for those the scheme protects. People who are aware of FSCS or think FSCS is important are also more likely to take advice and less likely to question the price of that advice, the study found.
 
The experiment, in which more than 2,000 people participated, was conducted by respected economic consultancy Oxera, and the Centre for Experimental Social Sciences (CESS).

Alongside the Oxera findings, which were published as part of a wider report entitled The need to know: FSCS protection makes a difference, FSCS has also published some findings of its regular mystery shopping exercise, which showed a clear gap in the quality of information firms are providing to their customers about FSCS. For example, 61% of mystery shoppers had to proactively prompt an adviser for information about the FSCS. The overall awareness score on the compensation limit for pensions was only 23%.

This survey, of 1,500 people aged 50 or over, also found that of those who do not know if their retirement-specific products are protected by FSCS, almost two-thirds (62%) say that knowledge of FSCS would have influenced their purchasing decision.
 
The FSCS says that today’s publication of The need to know: FSCS protection makes a difference demonstrates that awareness of FSCS prompts more individuals to consider paid-for financial advice and to choose less risky products that are covered by FSCS when planning their retirement finances.

The compensation scheme says that the research underscores the importance of advisers helping retirees make decisions that have life-long consequences. It also shows that advisers can do much more to “promote awareness” of FSCS.
 
Mark Neale, FSCS chief executive, said: “The report we have published today should be read by everyone involved in the advisory and wider life and pensions sectors. It is clear that greater awareness of the protection that FSCS provides to retirees has an impact on product choice and on the risks they are prepared to take when planning their finances.  It is key that providers and advisers make retirees aware of FSCS protection. 
 
“I am therefore pleased to announce that a group representing  leading industry firms has agreed to work together to look at developing an industry best practice standard for disclosure, which will offer a benchmark on how life and pensions product providers convey information about FSCS to consumers.

“This will not be a quick fix but we are confident that, just as we have in the deposit industry, we will arrive at a disclosure standard which will significantly improve consumer understanding and make it easier for providers to communicate where FSCS’s guarantees apply to retirement products.”