Rise in ISA subscription amounts is 'no big surprise'

George Ladds, head of investment and pension research at Fair Investment Company comments on HMRC figures that the amount of money being put into cash ISAs in 2009/10 is up 7% and stocks and shares ISAs up 29% on 2008/09.

"The ISA allowance increased substantially from £7,200 in 2008/09 to £10,200 in 2009/10, £5,100 of which can be invested into a cash ISA, so it is also no real surprise that there was an increase in the amount of money being invested into cash ISAs. The increase may also have been affected by the fact that savings rates were so low - even relatively low rates on cash ISAs were beating the returns offered by most savings accounts due their tax efficiency.

"There was a much larger increase - 29per cent - into the amount of money being invested into stocks and shares ISAs. Again, this is probably mainly as a result of the increased allowance, but it could also be a result of stock market activity.

 "Generally speaking, as the stock market goes down, people pull out, and as it goes up, people start investing again. Following the credit crunch, stock markets were right down, but as things started to improve, it went up, and therefore, so did investment into it, which is one explanation for the increase.

"Another explanation could be that people were getting poor returns on their cash, so tended to be willing to take a bit more of a risk and put their money into a stocks and shares ISA.

"There are many investment products available within an ISA wrapper, including relatively low risk investments, which tend to be the type of product people go for when they take their first step into investment.

"People are also starting to see ISAs more and more as a significant part of their investment portfolio, and realising their potential both as short term savings products and longer term investments to help fund retirement."