ISA investors cash-in

According to a report published this by research firm Datamonitor, sales of Individual Savings Accounts reached record levels in 2006.

However, it was cash ISAs that stole the show, as figures published by the Investment Manager Association have steadily shown weaker sales of fund based ISAs over a prolonged period.

"A tax-free mini-cash ISA is certainly more attractive than a standard savings account and returns have improved over several months thanks to interest rate rises," said Jason Hollands of F&C.

"However, it is doubtful whether this apparent boom in cash ISAs is a useful indicator as to whether they have encouraged the savings bug," he added, "since the UK household savings ratio has tested long-term lows over the same period."

"My hunch is that this is simply money that would otherwise have been in a conventional savings account. A better measure of the appetite for long-term savings will be when investors start moving from cash back into the markets."