The Budget was on people’s minds for months ahead of any announcements being made, with concerns over higher taxes and slashed allowances.
Among these were concerns that the cash Isa allowance would be cut, as well as fears the Chancellor would also take an axe to pension lump sum allowances.
Not everything that was feared came to pass, but this didn’t stop almost a quarter of people taking action with their finances ahead of the Budget despite not having confirmed information, according to exclusive data from St James’s Place.
However, financial experts have often warned that doing so could cause people to make irreversible decisions based on rumours that could leave them worse off in the long run.
Claire Trott, head of advice at St James’s Place, said: ‘Budget speculation had real consequences for people’s finances, particularly when it surrounds pensions and long-term savings.
‘In the lead up to the Autumn Budget, months of speculation created a sense of urgency for many people, prompting individuals to take action before any policies were confirmed – and our latest research shows that some now regret doing so.’
In fact, as many as a fifth of those who did take action now regret what they did with their money, St James’s Place said.
One of the most common actions ahead of the budget was to alter pension arrangements, with almost a third, 30 per cent, of people doing so.
For some, SJP said, this included taking their pension lump sum early without a plan of how to use it.
As a result, 19 per cent of those who did so now regret making pension changes without waiting to see what changes Rachel Reeves would introduce.
There was a 33 per cent increase in withdrawal requests on the Bestinvest platform in September, the firm said, before the change was ruled out ahead of the Budget. The size of pension income withdrawals grew by 146 per cent over the same period.
Despite rumours, Reeves chose not to cut the pension lump sum allowance from the 25 per cent that pensioners are allowed to take up to £268,275, once they reach the age of 55.
Trott said: ‘Pension changes, especially those connected to the tax-free lump sum, can be irreversible, and acting prematurely can be detrimental for those who had made plans over the longer term.’
‘Greater clarity and stability around tax and pension policy would go a long way in helping individuals make informed choices.’
Those who regret the decisions that they made are more likely to be those that took long-term action or action that they now can’t reverse.
Still, with rumours of cash Isa changes swirling, one in five made Isa adjustments ahead of the budget.
Half of these people had adjusted their investment portfolios, including moving money into cash or investing in safe-haven assets like gold, as well as delaying making new investments.
Pre-budget action also included making gifts to children or grandchildren amid concerns over future inheritance tax liabilities. Some 12 per cent did so, SJP said.
Some 7 per cent regret making gifts to family over fears of a lifetime gifting cap or new changes to inheritance tax rules, neither of which came to fruition.
However, some 15 per cent regretted changes to their investments, while a tenth of those who altered their Isas wish they hadn’t done so.
This is despite Reeves actually cutting the cash Isa allowance in the Budget from £20,000 to £12,000 for those under the age of 65.
Trott added: ‘For individuals, the most important thing during periods of uncertainty is to stay calm and avoid making reactive decisions based on short-term noise. Waiting for clarity before taking action puts people in a far stronger position.’
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