Financial planning

Our recipe for spook-free financial planning

Colin Dyer

Never mind Macbeth, his witches and their ghastly concoction, the question on our lips this All Hallows’ Eve is what’s brewing in your pension pot? Forget tongue of dog and eye of newt, and we’ll let you in on a few of the real ingredients for a healthy financial future.


A pinch of suspicion

It turns out that October 31st isn’t the only day of the year when ghosts and ghouls are lurking round every corner; pension related fraud is here to haunt us all year round. In total, more than £42 million has been lost to ‘pension liberation fraud’ since April 2014, when pension freedoms were first introduced.

Victims of this kind of fraud are generally tricked into moving their pension funds into investments that either do not exist or are unable to deliver the returns that were promised. Fraudsters will also often fail to mention the tax charges associated with ‘freeing’ pension funds before age 55. This often has disastrous consequences, as it can wipe out half the value of a retirement pot in one fell swoop.

The best way to avoid these kinds of scams is to be aware: scammers’ tactics are constantly changing, but some common things to watch out for include promises of upfront cash and one-off ‘deals’ with guaranteed high returns. If it seems too good to be true… maybe it is. So if you’re ever even a little unsure, the best thing to do is to run it by your financial planner; their knowledge of the financial world means they’re well placed to spot a scam.

Research conducted by the Financial Conduct Authority earlier this month shows that more than a fifth of over-55s who have received suspected fraudulent communications stay quiet – in fact, Brits are more likely to report fly-tipping (81%) than investment scams (63%). So if you do feel spooked at all it’s important to speak up and talk to someone you trust.

A dash of good forecasting

There is no age too young, nor time too soon to start planning for your retirement. These days we are living longer than ever, and with good financial planning, we should be set to enjoy the fruits of our labours for many years after we retire.

Whilst we might enjoy planning for many aspects of our retirement, there are always a few unknowns that could crop up and take our financial plans off course. Long term care is an example of this, as is unexpected illness or any other unforeseen circumstances. For this reason, it is important to save while you can, think ahead and ensure that your investment strategy gives you the flexibility to change your portfolio to produce income when you need it.

A splash of smart thinking

Smart tax planning is a vital part of any financial plan, with ISAs now allowing us to invest up to £20,000 a year tax free. The only thing more frightening than not taking advantage of opportunities to save tax-free, however, is the thought of inadvertently paying unnecessary tax.

It is now widely known that, under the rules introduced in April 2015, over-55s can withdraw regular or ad-hoc sums from their pension pots. Making a large withdrawal in a single month, however, can confuse the tax man into thinking this will be your income every month, and you can become subject to a very high “emergency” tax rate.

A frightening figure released at the end of the first year of pension freedoms (April 2015-16) revealed that the treasury had banked £1.6 billion in tax, almost double its initial estimate of £910 million. A high number of people had withdrawn sums from their pensions, yet many of those people had either failed to recognise, or to reclaim, their overpaid tax.

So ensure you learn from the mistakes of the ghosts of tax-men-past, and keep your wits about you when setting up, or thinking about, your next pension withdrawal.

A cup of courage

Whilst the safest and most straightforward way to save might seem to be in a bank or building society, you could be losing out in real terms if the interest on your savings isn’t keeping pace with inflation. It’s always good to provide yourself with a ‘rainy day fund’ to cover any unforeseen circumstances, but if you’re looking to save more than this, investing in funds or stocks and shares can provide you with better growth potential and help you beat inflation.

Whilst investments can, of course, go down as well as up and it is always possible that you may get back less than you paid in, there’s a wide range of investment options available to suit everyone, from the most cautious amongst us to the biggest risk takers. So don’t be a scaredy cat this Halloween, and make sure you’re not missing out.

If you think you could benefit from some financial advice to help you avoid any unexpected spooks this Halloween (or all year round), then please get in touch. We’d be happy to offer you a no-obligation discussion with one of our expert financial planners to go over your needs and find out how we can help.


This blog should not be regarded as financial advice. Laws and tax rules may change in the future and your tax treatment is based on your individual circumstances. The information here is based on our understanding in October 2017. Investments can go down as well as up and you may get back less than you pay in.