A third of ISA investors plan to use up this year's full allowance
Research from the Investment Management Association (IMA) reveals that nearly a third (32%) of equity ISA investors plan to invest the maximum amount of £10,200 into their ISAs for the current tax year (2010/11).
The IMA's Investor Perspectives Survey indicates a strong belief in the importance of ISA investing, with 70% of survey respondents saying it is important to take out a stocks and shares (equity) ISA each year.
The two groups most supportive of ISAs are families with young children and 35-54 year olds, with 76% of each group saying it is important to take out an equity ISA each year, regardless of the amount invested.
When asked what type of investment they intend to make in the next 12 months, 43% of UK investors said they would invest in an equity ISA, compared to 33% who said they would invest in a fixed income ISA.
Enthusiasm for ISAs, but limited awareness of allowances
While ISAs are popular and well-regarded, awareness of the new equity ISA allowances of £10,200 for this tax year and £10,680 for the next tax year remains limited.
Of all equity ISA investors, 55% did not know the current tax year's annual allowance, while 64% did not know the limit for 2011/12.
41% of survey respondents believe the annual ISA limit for this tax year is below the correct allowance of £10,200, while 38% believe it is below the correct allowance of £10,680 for the next tax year.
High sales of ISAs following new allowances
IMA figures reveal that retail investors have put £2.7 billion into ISAs in the first ten months of the tax year (from 6 April 2010 to 31 January 2011), only slightly behind the £2.9 billion seen from 6 April 2009 to 31 January 2010. The first ten months of the 2009/10 tax year saw the highest net retail sales since 2000.
Net ISA sales totalled £7.2 billion in 2009 and 2010, the highest two year period since 2000-2001, shortly after ISAs were first launched.
Whereas ISA sales follow a pattern of peaks and troughs with substantial inflows in March and April, 2009 was unusual in showing a second wave of ISA investment towards the end of the year.
Net ISA sales were the highest for any October in October 2009, when the ISA allowance went up to £10,200 for the over-50s. Similarly in April 2010, when under-50s could take advantage of the new allowance, net ISA sales reached their highest levels since 2001. (See chart.)
Richard Saunders, Chief Executive of the IMA comments: "The ISA remains an extremely popular product with savers, providing the ability to invest tax-free for the future.
"Our survey reveals a healthy appetite for ISA investing, coupled with a strong belief in ISAs: one-third of equity ISA investors plan to take full advantage of the increased allowance for this tax year, while 70% of ISA investors say it is important to take out an equity ISA each year.
"Investors have also signalled confidence in equities, with 43% of investors saying they intend to invest in an equity ISA in the next 12 months, a greater proportion than the 33% who plan to invest in a fixed income ISA."