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Five things on financial advisers' minds at the start of the new tax year

Published: 01/04/2021
A new tax year begins on 6 April, so we asked financial planning and retirement & savings experts to lay out the most important issues currently on advisers’ radars.


1. Early investors are better off in the long run

It’s a well-known fact in financial planning circles that a client who invests to utilise tax allowances at the start of the tax year is likely to make better decisions than someone who leaves it later.

“It's very important that clients take a long-term view to investments, so the start of a new tax year presents the perfect opportunity to discuss financial planning with clients,” said Mark Baldwin, distribution director, for VitalityInvest.

“There are a number of benefits to investing at this time, from getting the most out of allowances including the generous tax benefits that come with ISAs, to giving clients the chance to phase investments over the tax year rather than in one amount at the end. Many people leave it to the last minute - until the end of the tax year - but this can be stressful and create complications for clients. Starting from day one can ensure client contributions are spread across the tax year and can help them avoid unutilised allowances come the following April.”

2. Client vulnerability can no longer be ignored

According to the FCA’s most recent Financial Lives Survey, more than half (52%) of adults in the UK (27.7m) are in some way considered vulnerable, a figure that has risen since the start of the Covid-19 crisis1.

The study also found that the percentage of those suffering from poor health, low financial resilience or the fall-out of a negative life event was up 15% compared to February last year.

The regulator has increased its focus on financial advisers meeting the needs of vulnerable clients in recent years, with fresh guidance2  published last summer highlighting the significant impact the pandemic is likely to have, especially on those who had previously shown signs of vulnerability.

As the coronavirus situation continues to take its toll on people’s mental and physical health, as well as their finances, this issue is one that financial advisers simply cannot ignore.

3. The biggest threat to pensions drawdown is people underestimating their life expectancy

According to a recent survey, advisers consider the biggest threat on the horizon to people drawing down their pensions appropriately to be them underestimating their own life expectancy3.

Men spend 19 years and women spend 22 years on average in retirement, according to government data4. Since a large proportion of people will live beyond the average life expectancy, it is likely that a pension pot that aims to provide income for an average retirement period will not be sufficient.

Vitality data shows that for someone who would like to retire with an annual drawdown income of £13,8625  from their private pension, living five years longer than they might expect could leave them with a pension shortfall of around £50,0006  - a significant amount.

Mike LeGassick, director, Manning and Company said: “Time and time again we hear that clients aren’t taking into consideration what their retirement might look like in older age and with life expectancy increasing, this is a real concern.

“Through Vitality’s innovative shared value model, we are able to work with our clients to take a more holistic approach to their retirement, helping them to live healthier lifestyles now, whilst also preparing them financially for their future – whatever their retirement plans might be.”

4. Younger clients are more aware of the risks associated with not saving for retirement

The survey of advisers also found that nearly half of financial advisers (49%) agreed that clients under the age of 40 are more aware of the risks associated with not saving for retirement, than they were 10 years ago.

Justin Taurog, managing director of VitalityInvest said: “As advisers recognise, we are all living longer but people aren’t thinking through what this means for them financially in the longer term.

“Whether it’s the luxury of being able to spend more time and money on hobbies and adventures in retirement, or simply having the funds to provide for health and care needs in older age, advisers play a key role in helping people explore the implications of the financial decisions they make today and the impact they will have on their future.

“At Vitality, we want people to make sure they can really make the most of their retirement and that starts with being in the best health possible - that’s why our products incentivise and reward people with lower product charges for living a healthier lifestyle.”

5. Ethical, sustainable and net zero investments are the future

There is no denying that there has been an attitude shift in society towards sustainable business practices that are good for the planet and its people. Thankfully, we have seen financial services and investment firms embrace this movement.

Just last month, it was reported7  that the total of fund houses making commitments to support the goal of net zero greenhouse gas emissions by 2050 or sooner had reached 73 – representing a total of $23trn in assets under management – with the likes of Vanguard pledging their support.

Vanguard chair and CEO Tim Buckley said: "Climate change represents a long-term, material risk to our investors' portfolios. As a steward of our clients' assets, we recognize the crucial role we and others play in driving real progress on climate risk over time.”

"We look forward to helping drive collaborative and constructive dialogue across our industry to establish win-win solutions for long-term shareholder return and the goal of net-zero emissions by 2050."

Find out more about how VitalityInvest can help your clients achieve their achievement goals this tax year.

1.Financial Lives 2020 survey: the impact of coronavirus, FCA, February 2021:
2. Guidance for firms on the fair treatment of vulnerable customers, FCA, July 2020:
3. 202 UK advisers surveyed in February 2021 by Opinium
4. DWP Economic labour market status of individuals aged 50 and over, trends over time: September 2019 - the male average age of exit from the labour market was 65.3 years old and the female average age of exit from the labour market was 64.3 years old.
5. The difference between £20,200 p.a. required to fund a moderate retirement lifestyle (Pensions and Lifetime Savings Association: Retirement living standards) less the new State Pension of £175.20 per week
6. Vitality calculation showing the difference between the pension pot required at retirement based on 3.6% growth p.a. net of charges and drawdown income increasing by 2.5% p.a.
7. Fund managers representing $23trn in assets join net zero initiative, Professional Adviser, March 2021:

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