New research from Aviva suggests UK consumers have not kept up with the changing financial landscape of tax allowances - a personal finance 'knowledge gap' advisers can play a crucial role in filling, says Tim Orton
As this year's tax year-end countdown continues, it is worth taking stock to consider how different the world looked a mere 12 months ago, when the UK was still broadly committed to the European Union and sterling was relatively strong.
It has certainly been all change - we have a new Chancellor, a new 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.
As such, it is little surprise the economic outlook for 2017 is uncertain and markets are likely to be volatile. That is something Aviva's most recent Adviser Barometer survey picked up on - with more than twice as many advisers as the previous year identifying economic uncertainty as a key concern for the coming year.
For advisers, volatile markets can present issues when steering new clients through uncertain conditions. And if there is one thing that end of year tax planning ought to be about, it is certainty.
With these issues in mind, the Aviva Censuswide survey recently canvassed 2,010 consumers on their ISAs and pension savings and if they plan to maximise tax allowances before the end of the tax year.
The survey found that 53% of people who have tax-efficient savings said they had not yet finalised their plans for this tax year. At the same time, 52% said they might ‘possibly' (30%) or ‘definitely' (22%) increase their savings before the end of the tax year.
Another 10% said they did not 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.
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 that extends far and wide across the UK.
To pick one high-profile example, last year Bank of England chief economist Andy Haldane revealed: "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 more than 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.
Given other financial priorities and the recent changes in pension and ISA allowances and regulations, it is perhaps not surprising that consumers have not kept up with what their opportunities for maximising tax free savings could be for the remainder of the tax year. The message should be plain, however - make the most of this tax year's reliefs and allowances, whatever happens in our uncertain and volatile world.
Tim Orton is CEO of the Aviva Adviser Platform. You can find out more about Aviva's Tax Year End toolkits and guides for advisers here
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