Whether you associate Halloween with trick or treating, pumpkin carving or the slasher movie series, 31st October has become a key date in the Autumn calendar. 

So, with the spooky season just around the corner, here are five scary pension mistakes to avoid.

1. Not Saving Enough

According to a study conducted by Money.co.uk, around one third of Brits are not currently saving enough for retirement. This is a particular issue for young people where only half of all 18–24-year-olds are saving for retirement. There are many reasons for this, however, the simple fact is that the earlier you start, the less you are likely to have to pay in as investment growth will do more of the ‘heavy lifting’. Even if you pay just the basic level of contributions, it’s a start.

2. Not Checking the Investments

We review lots of pension schemes and it is astonishing how many times we encounter poor performing, high-charging pension investment funds. Pensions have become much more flexible and cost-effective in recent years and most modern pensions have a good range of options and flexibility. If you have pension schemes that are more than 10 years old, you should think about having them reviewed – it could save thousands of pounds in charges and ‘missed’ potential investment growth.

3. Not Taking Enough Investment Risk

Many people do not wish to take responsibility for investment decisions and, therefore, end up in the default investment strategy. This is usually a medium risk fund that is likely to be suitable for some, but not all. If you are in your 20s or 30s (perhaps joining a pension scheme for the very first time), it is likely that you can take a high degree of risk which means investing the bulk of your fund in a wide spread of global shares. History shows that, in general, these types of funds perform very well over the long term – typically growing much more than a traditional medium risk fund.

4. De-Risking the Investments When Reaching Retirement

This is a spin-off from the previous point and one that has roots in a time when the only option available for many retirees was to buy an annuity (an income for life). Assuming retirement at 60, it is possible that you will live for another 30 years or more. If drawing down from a pension, de-risking the entire pension fund makes no sense as growth opportunities will be lost. Tailoring the investment profile to your time horizon and likely spending profile is essential.

5. Going it Alone

Financial planning adds value. Pensions are complicated (just look how often the government changes the goalposts). Working with someone who has a deep understanding of pensions can potentially generate enormous value – charge reductions, tax savings, inter-generational wealth transfer opportunities, confidence to retire and confidence to spend money to name but a few.

Get in touch

If you want to ensure a treat rather than a trick this Halloween, get in touch to find out how we can help.

Jeremy Jackson is a Director & Chartered Financial Planner with Bluesky Chartered Financial Planners.