Regulators issue fresh scams warning and urge savers not to panic after LDI crisis

Regulators have again warned savers over the risks of scams as the cost-of-living crisis heaps pressure on strained household budgets.

Savers also urged ‘not to panic’ over recent headlines suggesting pensions are in ‘crisis’.

Problems linked to Liability Driven Investments (LDI) had created a cashflow issue for certain defined benefit (DB) schemes and a bond selling problem for the government – but the vast majority of people’s pensions were never directly at risk.

Tom Selby, head of retirement policy at AJ Bell, comments: “Rising inflation and the spectre of recession are looming over UK households, increasing the financial vulnerability of millions of savers and retirees.

“Brits have also been exposed to weeks of headlines suggesting pensions are in ‘crisis’, which inevitably caused huge unnecessary worry for lots of people.

“All of this uncertainty will inevitably have left people more vulnerable to scams and more at risk of making poor retirement decisions, such as withdrawing their entire pension pot in one go and potentially paying thousands of pounds in unnecessary income tax as a result.

“The reality was the post-mini-budget problems we witnessed, and the subsequent Bank of England intervention, were about preventing a ‘death spiral’ in UK government bond sales, rather than there being any direct or immediate threat to people’s pensions.

“The hedging instruments at the heart of the crisis were held by defined benefit (DB) schemes, meaning that the majority in defined contribution (DC) schemes were not directly affected. Even in the case of DB schemes with LDI exposure, provided the employer was not at risk of going bust, their pensions should still have been secure.

“It is vital as the dust settles on the LDI crisis that all parties involved in communicating the issue reflect on the unnecessary distress caused to people who thought their hard-earned pensions may not be safe.”