ISA sales fall

Sales of ISAs fell to £1.3 billion in the last tax year, compared to £2.5 billion in 2006/07.

Data from the Investment Management Association (IMA) show in March UK domiciled funds under management stood at £432.7 billion – down from £449 billion a year before.

Net retail sales stood at £414 million, from £1.2 billion last year, and net ISA sales stood at £276.4 million, from £533.8 million in 2007, an increase from the previous month's inflow of £32 million, but down from the £533.8 million inflow seen in March 2007.

Richard Saunders, chief executive of the IMA, said: "The ISA season this year was modest, though over £250 million inflows in the last five days of the tax year pushed it up to respectable levels.

"In current uncertain market conditions it is encouraging to see two months of positive net retail and ISA sales, a significant improvement on the previous three months. Retail investors continue to be cautious, however, with bond funds proving popular."

Rebecca O'Keeffe, head of fund management at fund supermarket Interactive Investor, described the fall in ISA sales as shocking.

"While most people predicted a fall in ISA sales in view of market conditions, even the most pessimistic will have been pretty shocked by the extent of the fall," she said.

"Net ISA sales over the full tax year are little more than half the previous year – demonstrating that the credit crunch and associated fall out has reached even tax efficient investors."

Ms O'Keeffe added: "The possible saving grace is that the IMA figures only reflect money that has actually been invested in the markets already.

"A large number of ISA investors have yet to commit their funds and are sitting on the cash, waiting for the right opportunity. This undoubtedly makes the numbers look worse than they actually are.

"There is no doubt that many investors are reluctant to invest in shares and funds and have turned towards cash instead."

The most popular sector in March was UK All Companies, representing 16 per cent of gross retail sales of UK domiciled funds. Some 76 per cent of gross retail sales into the UK All Companies sector were via intermediaries.

The UK Corporate Bond sector was the most popular UK domiciled net retail sector with inflows of £242.4 million. The sector with the biggest outflows in March was the Europe Excluding UK sector, with net outflows of £166.3 million.

Property funds saw net retail inflows of £21.4 million after four months of outflows.

Daniel Barnes