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90% of savers don’t know what the Personal Savings Allowance is

I think most people by now will have seen that, thankfully, Chancellor George Osborne has decided not to introduce any changes to the pensions tax relief system in the forthcoming 2016 budget, which is of huge relief to everyone with a pension, or those thinking about funding one in future.

However, according to research published in The Telegraph recently, the vast majority of savers were still unaware of the new personal savings allowance only a month before it was due to come into force. The study, conducted by AA Financial Services, found that 90% of savers did not know what the new allowance was. The personal savings allowance is one of several major changes to savings and taxation in April 2016.

All savers, other than additional-rate taxpayers, will receive a tax-free allowance for savings interest. The allowance will be £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. For those earning less than £17,000 in total income, there will be no tax at all to pay on savings earnings, thanks to the combination of the personal allowance, the 0pc tax band on savings and the personal savings allowance.

After having it explained to them, 49% of respondents said they didn’t know what to do with their money come April, with the choice between ISAs and savings accounts causing significant confusion. The new allowance applies to any savings interest paid after April 6, meaning existing fixed-rate bonds that mature after that date will fall under the new system.

Susan Hannums, director at savings advisers Savings Champion, said: “It’s deeply concerning that one of the biggest changes in a generation for savers is almost upon us and savers still seem grossly uninformed. “Between HM Treasury and the banks and building societies, more visible and useful information needs to be made available to savers to help them through the transition.” Ms Hannums said there had been a “vast difference” in the level of education being offered by banks and building societies, ranging from “well produced, detailed brochures” to “a few lines in generic customer communications”.

In January, a mystery shopping exercise conducted for Telegraph Money by Savings Champion, found that the majority of banks’ dedicated savings teams were failing to inform customers about the new allowance. One bank told the caller that the “economy would collapse” if tax stopped being taken on savings interest. One senior banking official also told Telegraph Money in January: “Despite a very public announcement by the Chancellor in March 2015, there has since been very limited communication on the implementation of the personal savings allowance. “Specifically, the finer details of the PSA haven’t yet been adequately communicated to the industry, which in turn limits the level of information we can give to customers about the impending changes.”

For further detailed information about this allowance, please see the Government link below: