ISA investors turn to equities as cash rates continue to fall

With the Bank of England once again cutting rates this month, to 0.5%, returns on cash investments remain at a record low; as a result ISA investors are taking a bullish approach to investing in equities in the next tax year, according to research from Barclays Stockbrokers. A fifth of investors (20%) plan to invest more in their Investment ISA in the next tax year, and three quarters of investors (74%) plan to invest the same amount as this tax year.

The survey, of 483 Barclays Stockbrokers Investment ISA clients, reveals that as a result of falling interest rates, almost half (42%) are reviewing their investment portfolios. Furthermore, a recent poll reveals 63% of investors believe shares will generate the best returns in 2009, followed by commodities (17%), then gilts and bonds (16%).

Barclays Stockbrokers has seen its clients fully capitalising on market volatility so far this year; to date its buy:sell ratio stands at 63:37. 2009 has also seen a 67% increase in the number of new ISA accounts opened compared to 2008 and for ‘top-ups' to current tax year ISAs figures this year have increased by 102%.

Barbara-Ann King, Head of Investment Strategy at Barclays Stockbrokers, says: "Our research shows cash is no longer king. Whilst interest rates continue to be low, informed investors are taking advantage of the potential long term returns from investments. It is encouraging that not only have the majority of our clients invested their full ISA allowance this year, but that a fifth of our clients are bullish in their outlook for investing in equities in the next tax year, and that shares currently account for around 80% of our ISA investments.

"For those looking to make their first step into investing, a Barclays Stockbrokers Investment ISA can offer the perfect solution, and is ideal for confident investors looking to develop a diversified tax free portfolio."

The research found almost half (45%) of Barclays Stockbrokers Investment ISA holders have already utilised their maximum allowance this year - the full £7,200. For those planning to invest more in their Investment ISA next tax year, a third (32%) are doing so as they believe equities will return more than cash savings. A quarter (25%) can afford to invest more next year than in the 2008/9 tax year.

Barbara-Ann King continued: "For those investors with a long term view, Investment ISAs can offer a route into the market. We are delighted to see investors actively taking advantage of their tax free allowance despite market volatility, and it's encouraging to see their outlook remains positive for the next tax year."