This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Tax rules can change and benefits depend on personal circumstances.
Whether you’re starting out or planning for retirement, this episode highlights small changes that can make a big difference over time.
Use the player icons above to listen on your favourite podcast app, or read the full transcript below.
This podcast was recorded on May 26 2026 and all information was correct at the time of recording.
This podcast isn’t personal advice. If you’re unsure what’s right for you, seek financial advice. Tax rules can change, and benefits depend on personal circumstances. Investments can fall as well as rise in value, so you could get back less than you invest. Past performance is not a guide to the future. This is not a recommendation to buy, sell or hold any investment.
Full podcast episode transcript
Helen
Hello and welcome to the Switch Your Money On podcast from Hargreaves Lansdown. I’m Helen Morrissey, Head of Retirement Analysis
Clare
And I’m Clare Stinton, Senior Personal Finance Analyst. I'm really looking forward to today's episode, Helen. We've got a good one in store. So, we are talking about the top money mistakes that people make and the common financial pitfalls that can catch us all out. We're choosing to shine the spotlight on money mistakes because like school subjects, DIY tasks, baking a cake, or even playing rugby, we learn from making mistakes, either our own experience or by understanding where others have gone wrong. So, we're hoping that by sharing our own errors, as well as the common traps that we see, we can help you avoid them. So, on that note, Helen, do you have a personal money mistake that others can learn from?
Helen
I absolutely do. I mean, I know that you're going to talk about this a little bit later on, Clare, but I would say my money mistake is not starting investing sooner. I think I fell into all those traps of thinking that you need to have a lot of money to start investing. I think I was a little bit scared about making decisions. And, you know, with hindsight, I wish that I, you know, got started a bit earlier than I actually did.
Clare
I think that's a common one, Helen, because as we'll talk about later, actually, one of the most powerful tools in investing is that long timeline, isn't it?
Helen
Absolutely, so what was yours then, Clare?
Clare
Mine would probably be not budgeting as soon as I started earning. So, I don't think that we can really overstate how beneficial it is to understand what you've got coming in, what you're actually spending your money on, but also having a plan for what you're going to spend your money on, especially when it comes to starting out. If you've recently got your first pay check or you're going to university, actually, this can really help you set up good financial foundations and build your financial resilience from the get-go. So, we really need to banish the negative reputation that budgeting has. I've seen people's expressions change in financial wellbeing sessions the second the topic comes up. So, you say budgeting, and I think people immediately think restrictions, going back to basics. And it really needs reframing as smart spending. It's not restrictive, actually far from it. If you put a budget in place, you'll be able to confidently prioritize spending on what you enjoy and writing it all down in black and white, or using an app where you can track where you're spending and what you're spending on, will usually throw up a few surprises, whether that's a subscription that you’ve forgotten that you're paying, or actually just how quickly those matcha and pastry runs of the weekend can add up. And they do add up quick. So, there's a tendency that the more you earn, the less you feel you need to budget. But it's actually the opposite. Having a plan will help prevent lifestyle creep, which is where your spending quietly rises to match your income. And before you know it, if you've been earning £300 more a month for the last year, you might have nothing to show for it. Budgeting isn't a one and done exercise, but does need to flex with you, so it's best to review it in line with any income changes and with life events. But what about the potential money mistakes we can make when it comes to our pension, Helen?
Helen
Yeah. I mean, I just wanted to say before I start on that, I think you are absolutely right about rebranding, almost the idea of what you're saying, if you like. You know that idea of smart spending. I think when we look at budgeting, there’s this idea that you're restricting yourself in some way, whereas what you’re doing is your allocating your money to make sure that you can enjoy that money doing the things that you, you find really important. So absolutely agree with that. But thinking about our pension, I think that there are several potential money mistakes that we can make when it comes to that. So, I think the first and possibly the most important one is not engaging with them earlier enough, and that is really easily done. I think, you know, life gets busy and with auto enrolment we are at least contributing to a workplace pension and that is good. However, the question is, is that enough for what you need? So, auto enrolment minimums are set at a 5% contribution for the employee and 3% for the employer. Now, for many, if they save throughout the working life, that might give them enough in retirement to meet their needs. However, that's not the case for everybody. So, if you are a higher earner for instance, or someone who is taking breaks from the workforce, you might find that you might have a bit of a nasty shock when it comes to retirement if you haven't kept track of where you are.
Clare
Similarly, we've already touched on this, but not investing early enough is a common pitfall, so some may overestimate the risk of investing, and others may underestimate the risk of doing nothing. But once you've got your money tucked away for emergencies, investing little and often can be one of the most powerful ways to build your long-term financial resilience. Holding excess cash long term for periods of five years or more means inflation quietly erodes your purchasing power. So rather than going forwards and building your wealth effectively, you're sliding backwards. And the greatest friend to investing is time, because that compounding works quietly in the background over a long timeline. It can do a lot of the heavy lifting for you. And that's why Helen, actually engaging with your pension early is so important, isn't it? It's that same compounding which can have that big impact. And it's why you hear “time in the market”, not “timing the market”. And I know that one of our colleagues, Emma Wall, one of her favourite ways to put it is that the best time to invest was yesterday. And the next best time is today. And you can get started from as little as just £25 a month. Though I do need to say that investment returns are not guaranteed and investing for five years or more increases your chances of positive returns compared to cash savings. But you could get back less than you invest. But Helen, let's go back to what you said about higher earners, because that's really interesting. Why would they need to be particularly wary of relying on auto enrolment minimums?
Helen
So, I think it's a case of lifestyle really Clare. So, saving auto enrolment minimums will give you a good start on your pension saving. But if you're used to a lifestyle where for instance, you might go on holiday a bit more often, or you really enjoy lots of nice meals out, you might be wanting to continue that to some degree in your retirement years, and saving at auto enrolment minimums might leave you short of that. So, the HL Savings and Resilience Barometer highlighted the issues that higher earners face in this regard. Saying that that they face a pension saving gap of well over £60,000 if they want to maintain their lifestyle in retirement.
Clare
I mean, everyone has a different level of expenditure and different hopes of what their retirement would look like. So, it is really important that individuals have a think about what level of income do they need, to work out if there is a gap there and they, as you say, can use calculation tools to work out how far they have to go to make up that difference. So, what can be done about that?
Helen
Yes, so as you say, you know, these do look like big figures that I've just quoted there, but they can be managed. So, things like just keeping an eye on your pension from time to time, checking how it's performing is really important. So have a think about what you want your retirement to look like. Now, once you've worked out that, you can start thinking about what that might cost. And then from there you can go on to how much you need to save to try and give that to you. So you can use a lot of online pension calculators out there that can check to see what you're on track to receive, if you plug in your current pension numbers, for instance. Now, if you find that you are on track for the retirement income that you want, then that's absolutely brilliant. If not, you've got time to do something about it. And I believe a small actions, such as upping contributions every time you get a pay increase, for instance, can make a really big difference over time. So I’d also say, you know, make sure that you're making the most of your employer contribution as well where possible, if they're willing to up their contribution if you increase yours. This is what's known as an employer match, then that can be a real game changer for your retirement planning.
Clare
And it's really important not to stick your head in the sand about, isn't it? As with all personal finance matters, actually everything: health, your career, nutrition and so on. The more you know, typically the more power you have.
Helen
Absolutely right Clare. So in research we did with Opinium towards the end of last year, I think it was October time, we asked around 2, 000 people what their biggest retirement regrets were, and some of the biggest were things like not contributing enough, assuming that you would be okay… you know checking in on your pension periodically can help you to avoid those regrets.
Clare
You mentioned people who take time out of the workplace also being at risk. I'm guessing that's because they aren't part of the workplace pension and so might be contributing less?
Helen
Yeah, that's right. So, I also wanted to highlight the issues faced by working mums -people who take time out of the workforce on maternity leave. Now money can get really, really tight around that time. And it's understandable that when you're budgeting, you might decide that that's the time to stop your pension contributions because you've got other outgoings. However, what I would say is that wherever possible, try not to do that, so your pension contribution will go down alongside your pay as you're on maternity leave. But your employer has to maintain their contribution at the same rate as before you went away on maternity leave. So, this can be a really useful thing in maintaining those workplace contributions to your pension while you're away. If you're part of a salary sacrifice scheme, then contributions are treated as employer contributions. So this means that they should continue to pay the entire contribution based on your pay before going on maternity leave.
Clare
That's a really handy tip, Helen, and one I agree that isn't very widely known. I've had lots of conversations with women about what happens to your pension when you take time off to have a baby, and as well with conversations with those planning maternity leave. And unfortunately, the assumption tends to be that they need to draw or stop contributions because they won't be able to afford to keep them up once their pay drops. So, this is something we really need to raise awareness of and, you know, shout from the rooftops. It could go some way to bridging the gender pension gap. What other top tips can you give to make sure that people don't fall foul of their retirement planning?
Helen
I think another key one is for couples and the perils of leaving retirement planning in the hands of one partner. This can be really tempting if your partner, for instance, has a good pension, but you need to think about what might happen if you were to split up. And you know, if you were to be overly reliant on your partner's pension and you were to split, you might find yourself approaching retirement with little, if anything in terms of pension provision. And that is a situation to avoid wherever possible. So, what I would say is if you leave it in one partner's hands, you don't really know how you’re progressing towards your goal. So that means that there's a chance you might only find out very belatedly that you actually aren't on track for the retirement you were expecting. And that might mean that you have to make some really big cutbacks.
Clare
That's a really good point. I think also something that's typically more common if there is one person in that couple who is the breadwinner or a higher earner, and therefore they have the opportunity to get that higher rate tax relief, but it would be a really nasty shock that no one wants, if you are the partner who then ends up with very little in their pension. So again, it's about making sure you're informed. The more you know, the more in control you are of your financial future. So, what would you say is the best way of avoiding that?
Helen
So, the key I think, is to always maintain your own pensions wherever possible. And that means if you and your partner were to stay together, then you've both got your pensions to spend, which is brilliant. You know, you've both got something there. But I also think that having your own pension pot is important in that, that's your pot of money to spend. And I think that independence is hugely important. I'd also say it's vital that partners talk to each other about money and pensions, and this way they can ensure that they're both working towards the same retirement goals as their partners, and that they can flag if they think that the falling behind. It just means that both partners have a clear idea of what they have and what they're working towards, basically.
Clare
Absolutely. And splitting pension wealth across both partners pensions can also mean greater tax efficiency as a couple in retirement, because you can take advantage of each person's tax-free allowance, which at the moment is around £12,570. So, you can draw that, both of you, before paying any income tax, which potentially helps to reduce your overall tax bill. Are there any final things that people should be aware of?
Helen
I'd say one final thing to flag is making sure that you claim all the tax relief that you're entitled to on your pension contributions, so pension tax relief is set at your marginal rate of income tax. So, if you pay basic rate tax you get 20% relief on your pension contribution. So that means that for every £100 contributed to your pension, only £80 leaves your pocket if you're a basic rate taxpayer. Now if you're a higher or an additional rate taxpayer, the same contributions and you're going to cost you £60 or £55, respectively. I need to add in here, though, that Scotland has further tax bands that could see you get an even higher rate of tax relief. So, if you're a basic rate taxpayer, you should receive the appropriate tax relief on your contributions automatically. But if you pay tax at a higher rate, there is a chance that you could be missing out without even realising it. And it all depends on what type of pension you're contributing to.
Clare
Okay. Can you give us a bit more information on that?
Helen
Yeah. So, if you're in a salary sacrifice arrangement or what's known as a net pay arrangement, then you should get the right amount of tax relief automatically. So, under net pay, your pension contribution is deducted from your salary before income tax is paid. So, this means that you only pay tax on what's left, so you will get the full tax relief. However, if you contribute to what's known as a relief at source arrangement that things do work a bit differently as contributions are deducted from your salary after tax. So, under the basic rate, your employer takes 80% of the contribution from your salary, and then they reclaim the extra 20% from HMRC. But if you pay a higher rate of tax, it's your responsibility to claim it. Now many private pensions such as SIPPs, as well as some workplace pensions are set up as relief at source, so it is worth checking with your provider or your H.R. department if you're unsure.
Clare
Okay, so for those people who could go about reclaiming tax relief, how would they do that?
Helen
So, you can do it through self-assessment, and you can backdate claims for up to four years. If you don't fill out self-assessment forms, you can also claim the relief online through the Gov UK website or even via the post.
Clare
So, make sure that if you are someone that's able to reclaim your contributions, you do that before April and then you can claim the maximum. So, thanks Helen, lots of interesting tips there for pensions and a great final pension tip on reclaiming tax relief that could put some money back in the pockets of some listeners. There's potentially quite a bit of money to reclaim from HMRC if you've been a high-rate taxpayer for recent tax years, because it's the current tax year plus for that you can go back and backdate. Just be mindful that with pensions, any money that you're putting into a pension is not usually accessible until age 55, though that is rising until age 57, from 2028.
Helen
Good top tips there. Clare. Any other common pitfalls to flag?
Clare
Yes. Let's talk savings because a really common money pitfall is letting your savings sit idle in your bank account when they could be working harder. So, in the same opinion survey that you mentioned earlier, Helen, we asked people when they last switched savings account for a better rate, and 27% of people have never switched to get their hard earned cash earning more. And 29%, so nearly 3 in 10 people, haven't switched in the last 1 to 5 years. The good news is that's a really simple one to fix. And now is the time, because at the moment there's a big difference between the top and bottom paying accounts. So, to get the better interest rate, it does mean shopping around. We're seeing that it's the challenger banks that are pushing interest rates up higher. The bigger high street banks may not be as quick to pass on higher rates. So, it literally pays to shop around. It is worth taking just a few minutes to check what level of interest your cash is earning, and if it's not competitive, it may be time to switch. And if you want to ensure that you build this healthy habit, then you can set up a monthly saver on payday that moves the amount that you wish to save from your current account into your top rate savings account. And that way, your savings of ringfenced and you are unlikely to dip into them by accident.
Helen
There's some mind-boggling figures you just mentioned there, Clare, about people who haven't switched or people that haven't switched regularly. How much difference could it make to someone's bank balance if they switch from, say, a bottom paying account to a top savings rate?
Clare
Great question. Shopping around could add hundreds of pounds to your bank balance. So, our calculations show that if you have £5,000 in savings earning 2% interest after five years, it would grow to around £5,525. If we extend that timeline and assume that the same level of interest over 15 years, it would total £6,748. But had do you put it into a top paying savings account, where it was earning around 4.5%? After five years, it would be around £6,259. So that is around £700 difference. And then after 15 years, your savings would total £9,808. So, a big, big difference from the £6,748 where you're earning 2% interest. Now, I should point out that with all of these calculations, we are assuming that annual compounding and interest rates remain constant throughout the period.
Helen
So, as you say, there's some significant differences that you've highlighted, especially when looking over that longer timeline. It clearly does pay to shop around, doesn't it? So, are there any other considerations that you want to flag?
Clare
So, with interest rates being higher, if you've got cash sitting in non-ISA savings accounts, then it's worth keeping an eye on the level of interest that you're earning. So, anything that you earn above your personal savings allowance will be subject to income tax outside of tax efficient wrappers. Basic rate taxpayers can earn £1,000 interest tax free. Higher rate taxpayers get a £500 allowance, but top rate taxpayers have to pay tax on every pound of interest they earn. If it's sat outside of tax official wrappers. Next April, tax rates on savings interest are rising. Interest earned will be taxed at income tax rates plus 2%. So that would be 22% for basic rate taxpayers. 42% for higher rate taxpayers and 47% for additional rate taxpayers. But tucking your money inside a cash ISA and you'll shield returns from the taxman, meaning you keep every penny. Plus, it could also spare you from some financial admin, such as having to complete a tax return. If you do need to pay tax on your interest.
Helen
And we all like to be doing a bit less financial admin at the end of the day, don't we, Clare?
Clare
Absolutely. So that's all for this week. But before we go, we should remind you that this was recorded on May the 26th, 2026 and all information was correct at the time of recording.
Helen
Next week, Anna Macdonald and Matt Britzman will be back with an investment episode.
Clare
Nothing in this podcast is personal advice. If you're unsure about what's right for you and your circumstances, please do seek advice.
Helen
Tax rules can change and benefits will depend on individual circumstances. Pension money can't normally be accessed until the age of 55, rising to 57 from 2028.
Clare
Over five years or more, investing typically offers better returns than cash savings, but investments go up and down in value so you could get back less than you put in. So, all that's left is for us to thank our producer, Elizabeth Hotson…
Helen
And to thank you all very much for tuning in. We'll be back again soon. Goodbye.
Clare
Bye