ISA sales improve due to rise in annual allowance

Posted on October 5th, 2010 | Categories - Savings

ISA sales may hit a record high this year due to the rise in the annual allowance investors can pay in to the scheme each year.

Last October the government increased the yearly ISA allowance for over-50s from £7,200 to £10,200. This year the new rule was extended to under 50s as well, which sparked a doubling in net sales of stocks and shares ISAs to £4.6 billion, according to the Investment Management Association (IMA).

Richard Saunders chief executive at the association said: “The inflows we have seen since October last year are the highest since ISAs were first launched. There is a good chance that 2010 could be the best year ever for ISAs”.

An IMA survey illustrated that 44% of people supported the idea of a lifetime tax-free allowance. Mr Saunders said: “Our research shows that people are positive about incentives to save – with around half of existing investors saying they would invest more if the annual ISA allowance were raised”.

Investment director at Fidelity Investment Managers Tom Stevenson further explained the rise in sales: “There’s a search for income. Interest rates are so low and the expectation is that they are going to stay low. That’s what’s encouraging a lot of the sales and the move into funds is because people are realising that may be they have to take greater risks to achieve what they aspire to”.

Though he supported the increase in allowance, Mr Stevenson added that the changes only helped the wealthy who were already investing. He said there may be better ways to boost savings that could prove more effective than just raising the limit.