Rising rates and turbulent markets keep industry guessing on ISA season

With just over a month to go before the end of the 2006 / 7 tax year, it is crunch time for investors to decide whether to "use" or "lose" their £7000 annual tax free Individual Savings Account (ISA) allowance according F&C Investments.

However, Jason Hollands, Director, Head of Communications for F&C, points out that early financial service industry hopes for a bumper "ISA season" are very much up in the air given recent interest rate rises and this week's turmoil on global stock markets.

Hollands points out: "IMA figures for net industry ISA sales have been suggesting a disappointing trend, down 71% in January from the previous month and down 62% year on year. Our hunch is that this is partly due to the three interest rate hikes since August which may be prompting potential investors to focus on paying down mortgages and credit debt rather than commit to the stockmarket."

"The sharp falls in global equity markets this week could well unnverve potential investors further," he added.

"While it is difficult to predict short term market movements, savvy investors will know that set backs in markets often present great buying opportunities, as long as you are investing on a longer term horizon: fortune favours the bold."

Hollands warns that it is mistake to forgo making long term investment decisions backed up by attractive tax perks simply on the back of short term sentiment. Equity ISAs, he points out, should really be viewed on a minimum of a five year time horizon and F&C's current view is that on fundamental grounds shares look attractive over the medium to longer term.

"Investors should seek financial advice before investing in stock markets but with 6 April drawing ever closer, they need to act quickly or risk losing this year's allowance..For those really spooked by the recent roller coaster ride, they might consider more cautious areas such as equity income funds where the dividends provide some support, corporate bonds, multi-manager or cash plus funds."

Finally, Hollands points out that investors who leave their decision until the eleventh hour risk rushed decisions or, worse still, simply failing to get their paperwork in on time: "F&C, like many ISA providers and advisers, provides the option of investing online – this certainly makes sense if you find yourself racing to beat that all important deadline."