It’s a grave situation for millions of people with zombie products, vampire direct debits and ghosts of the past lurking in the dark corners of their finances.
These hidden horrors can cost you hundreds of pounds a year, so it’s worth taking the time to dig deeper, unearth a better deal, and knock your overspending on the head.
If your child was born between September 2002 and January 2011, they’ll have a Child Trust Fund (CTF).
They were a useful way to save and invest tax efficiently for the future, but when the accounts were replaced with the Junior ISA in 2011, existing CTF’s gradually morphed into zombie products — shuffling unthinkingly to the bitter end.
CTFs have less to offer than Junior ISAs (JISAs) , and you can switch from one to the other. The two accounts have the same tax benefits; the annual limit is the same; the money is still locked away until the age of 18.
However, if you’ve opted for a cash CTF, you can get a better rate in a JISA, and if you’re in an investment CTF, you may be paying over the odds in charges, so it’s well worth tracking yours down and making the switch.
For the 430,000 people who have reached the age of 18 and forgotten to claim their CTF, these zombies are well worth unearthing, because they contain an average of £2,000 each that can be withdrawn immediately.
Another zombie lurking in many people’s finances is an old savings account.
If you fixed for a period and then left it for longer, it’s likely to have rolled over into an account paying a horrifyingly low rate.
Alternatively, if you have an easy access account and haven’t switched for a while, there’s every chance the rate on your account has gradually got less competitive.
An investigation by the Financial Conduct Authority found that the longer you leave your money in an account, the lower the interest rate you’re likely to receive on it.
This may well end up being around the top of the savings market, so it’s the ideal time to hunt for a better home for your savings.
There’s every chance you’re feeding the vampires too. These tend to come in the form of direct debits, or recurring payments set up years ago, which are still sucking the life out of your current account.
It’s worth checking through your direct debits for subscriptions and memberships, and asking whether you really need them.
Don’t stop there though. You also need to look through your statement more closely for regular payments that might have been set up on a debit card, which can lurk undiscovered for even longer.
Ghosts of the past
There are plenty of products considered quite normal years ago, that you wouldn’t touch with a bargepole today, so it’s worth checking whether these ghosts are lurking in your finances.
You might want to start with profits investments. They were very popular, but tax inefficient and opaque.
They also came with unclear charges and market value reductions when you needed them least, so if you are still invested in one, it’s well worth considering a move.
However, you need to consider the costs, tax, and loss of guaranteed rates of return before transferring or cashing in.
It’s also worth checking for pensions taken out before the year 2000, which often charge more for less, compared to modern versions.
You may be able to save by switching, and at the same time, you may be able to consolidate a number of smaller pensions into one — so it’s easier to manage in future.
However, you need to look before you leap, and check whether they have hefty fees for switching or any of the valuable benefits that were sometimes offered within some of these older pensions — like guaranteed annuity rates — which you won’t want to lose.
It’s shocking what can be lurking undetected in your accounts for years, quietly devouring your financial resilience, or lying in wait to give you a nasty surprise. So when you’re on the prowl for Halloween horrors this year, it’s worth checking your finances carefully.