You might enjoy the delicious thrill of watching a scary film or taking your grandchildren trick-or-treating on Halloween.
If so, you’re not alone. According to Statista, UK consumer spending on products for this spooky, ghoulish season has quadrupled between 2013 and 2023.
Whether you embrace the idea of a good scare or prefer a cosy night safe at home with all the lights on, here are five frighteningly common financial mistakes you’d be wise to avoid. Read on to find out more.
1. Paying too much attention to external “noise”
There are many external factors that could affect your finances, from market volatility to changes in legislation.
Indeed, you might be feeling concerned about how the Labour government’s first budget on 30 October could affect your financial plan.
However, paying too much attention to such external “noise” could lead to undue stress and poor financial decisions. For example, if you rush to sell your shares when the market dips, you could make a loss and lose any chance of your investment recovering in value when the market improves.
Instead, by focusing on factors you can control and sticking to your long-term financial plan, you could ride out any periods of uncertainty and continue progressing towards your goals.
Read more in your September team update: A word on the upcoming Budget from our advice and compliance director, Fiona Tait
2. Withdrawing from pensions earlier than necessary
Most people can access their personal or workplace pensions from the age of 55 (rising to 57 from 6 April 2028). However, this doesn’t mean it’s always a sensible idea to do so.
According to research published by IFA Magazine, 1 in 10 retirees regret dipping into their pension early without seeking financial advice. So, it’s well worth planning your pension withdrawals with care.
Indeed, people are living longer on average than previous generations, so your retirement savings may need to last you 30 years or more.
Your pension is one of the most tax-efficient ways to save. The longer you leave your money invested, the more it could potentially grow.
Conversely, if you start drawing flexibly from your pension while you’re still working, you could trigger the Money Purchase Annual Allowance, which will reduce the amount you can contribute tax-efficiently to your pension each year to just £10,000 (2024/25).
So, if you have other sources of income, you might want to draw on these before dipping into your pension.
What’s more, pensions are not usually considered part of a person’s estate for Inheritance Tax purposes. So, you could preserve your pension and use it as a tax-efficient way to pass on wealth to your loved ones.
3. Failing to plan for later-life care
Recent research published by Care Home Professional has revealed that less than a third of UK adults aged over 60 have a clear plan in place for later-life care.
While you might think you have more pressing things to think about, planning ahead could ensure that you receive the later-life care of your choice if you need it.
Indeed, the potential costs involved could be high. According to figures published by Which?, the average weekly cost of residential care in the UK rose by 19% between 2021/22 and 2022/23.
By factoring later-life care into your financial plan you can rest assured that you’re prepared to cover such costs should they arise.
Talking about your plans with your family could also provide invaluable peace of mind that your wishes are protected.
Read more: The importance of factoring later-life care costs into your financial plan
4. Not writing a will or failing to update it
According to research by Canada Life, more than half of UK adults have not made a will. This includes 13% of people who have no intention to write one.
Yet, writing a will is the only way to take control over what happens to your property, money, possessions, and investments after you die.
What’s more, your will isn’t just a means of passing on your wealth. It also allows you to make important choices such as who will act as a guardian for your children and how your funeral will be carried out.
November is Will Aid Month, when participating solicitors waive their fee for writing a basic will. Instead, they might invite you to make a voluntary donation to charity. So, if you haven’t made a will yet, now is the perfect time to make it a financial priority.
If you have a will, but it’s hidden away gathering dust, you might want to dig it out and take a look. Your circumstances and wishes may have changed since you wrote it so it could need updating. Failing to do so might mean that your wealth is passed on to an unintended beneficiary.
5. Going it alone
The most common mistake made by characters in scary films is heading off alone into a dark and secluded place filled with potential danger.
While there are hopefully no chainsaw-wielding, murderous villains in your everyday life, going it alone financially could lead to the above scary mistakes and others.
In contrast, a trusted financial planner can use their expertise to support you in developing helpful financial habits that move you closer toward your long-term goals.
You might also benefit from improved emotional wellbeing with a financial expert by your side. A study by Royal London found that people who worked with a financial planner felt more in control of their money, more secure and stable, and better able to cope with life’s shocks – an appealing benefit during Halloween and beyond.
Get in touch
If you’d like to find out how we can help you avoid these frightening financial mistakes and build a plan that keeps you moving towards your goals and dreams, we can help.
Email hello@intelligentpensions.com or call 0800 077 8807.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning or will writing.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pension Regulator.