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Tim Orton

Tax year end 2016/17: the client knowledge gap

Feb 6, 2017, 10:56 AM
by Tim Orton, CEO, Aviva Advised Platform
Tim Orton weighs up recent research this tax year end
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Advisers are well aware that the 2016/17 tax year ends at midnight on 5 April, four weeks after the Spring Budget.

Our most recent research shows that UK consumers haven’t kept up with the changing financial landscape of tax allowances. It’s a personal finance ‘knowledge gap’ which advisers play a crucial role in filling.

Tax year end 2016/17: volatility vs certainty

As this year’s tax year end countdown continues, it’s worth taking stock to consider how different the world looked a mere 12 months ago, when the UK was still broadly committed to the EU and sterling was relatively strong. It’s been all change: we have a new Chancellor, Prime Minister and an independent and unpredictable new US President. Anyone expecting that these events, coupled with significant shifts in geopolitics, will have little impact on financial markets is likely to be disappointed.

For 2017, it’s little surprise that the economic outlook is uncertain and that markets are likely to be volatile. That’s something that our most recent Adviser Barometer (1) survey picked up on, where more than twice as many advisers as last year say economic uncertainty is a key concern for the coming year. For advisers, volatile markets can present issues when steering new clients through uncertain conditions. And if there’s one thing that end of year tax planning is about, it’s certainty. 

What consumers think about maximising tax allowances

With these issues in mind, we recently asked 2,010 consumers about their ISAs and pension savings (2) and if they plan to maximise tax allowances before the end of the tax year. The results showed that 53% of people who have tax efficient savings said they haven’t – as yet – finalised their plans for this tax year. At the same time, 52% say they might ‘possibly’ (30%) or ‘definitely’ (22%) increase their savings before the end of the tax year.

Another 10% said they didn’t know what the tax allowance for savings is. It seems likely that this is an area where advisers could usefully initiate discussions with their clients. 

Personal finance knowledge gaps (and how to fill them)

Although you, I and the rest of the adviser community live and breathe personal finance facts and figures, research shows there is an extensive knowledge gap which extends far and wide across the UK. For example, last year the Chief Economist at the Bank of England revealed (3): “I consider myself moderately financially literate. Yet I confess to not being able to make the remotest sense of pensions.”

Our research found that on average, people underestimated the full extent of their ISA allowance by over a third – when asked what the ISA allowance for this year is, the average response was £9,437 which is a lot lower than the real figure of £15,420. Looking across the range of responses, 78% of people think their allowance is lower than the actual figure and 56% believe it to be under £10,000.

To sum up, given other financial priorities and the recent changes in Pension and ISA allowances and regulations, it’s maybe not surprising that consumers haven’t kept up with what their opportunities for maximising tax free savings could be for the remainder of the tax year. The message is plain: make the most of this tax year’s reliefs and allowances, whatever happens in our uncertain and volatile world.

Find out more about Aviva's Tax Year end toolkits and guides

Tim Orton

CEO, Aviva Advised Platform

(1) Aviva Adviser Barometer November 2016 
(2) Aviva Censuswide survey  30/12/16 – 06.01.17 (2,010 UK-wide  consumers aged 18+) 
(3) Andrew G Haldane, Chief Economist, Bank of England http://www.bankofengland.co.uk/publications/Documents/speeches/2016/speech908.pdf
LF10236 02/2017

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