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Investment ISA deposits halved in latest tax year

Investment ISA deposits halved in latest tax year
Date of Publication: Tuesday, 07 May 2013 10:31

Demand for investment ISA funds shrank by half in March from the previous year, figures have shown, raising further concerns that struggling households are unable to fill their yearly tax-free entitlement.

 

Figures from the Investment Management Association (IMA) have shown that net ISA sales reached just £787 million in March, compared to £1.42 billion in February and £1.54 billion in March 2012.

 

Overall, savers accumulated an additional £1.13 billion in ISA funds throughout the 2012/13 tax year, accounting for withdrawals.

 

But even with a typical last-minute surge, which saw £347 million invested in the first five days of April, the total still only just exceeded half of the £2.22 billion invested in the previous 2011/12 tax year.

 

The IMA Chief Executive, David Godfrey, described the last-minute rush as “a common trend.”

 

“Overall sales were lower in March compared to recent months,” he observed.

 

“The sector rankings for the month both for ISAs and funds in general suggest that investors are spreading their money across different asset classes and that both growth and income strategies are in demand.”

 

Withdrawals Up in 2013

The last minute additions of £347 million at the end of the tax year – higher than any monthly sales recorded in the last eleven months – reversed a heavy trend of withdrawals in the first quarter of the year.

 

Savers withdrew £142 million more in funds than they invested during the first three months of 2013.

 

This comes as a recent poll suggested that the equivalent of five million households were resorting to credit cards, overdrafts or savings to buy basic necessities.

 

Mr Godfrey said that regular monthly investments into tax-free funds could help investors to manage their cash-flow.

 

"Investors should be reminded that they can invest in ISAs on a regular monthly basis," he said.

 

"This not only reduces the financial burden of finding a lump sum but also reduces risk as you buy more units if prices fall, which then achieve higher proportionate gains when prices recover."

 

But bank bosses have rallied the government over recent months to raise the cash ISA allowance (currently £5,760) to match the higher allowance for riskier investment products (currently £11,520), arguing that investment ISAs are less relevant to customers' needs.

 

Keith McDonald
Which4U Editor

 

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