Net sales of Isas took a big hit in July, falling by 36 per cent from June and 72 per cent compared with a year ago, according to the IMA.
Net ISA sales were £77m in July, down from £120.9m in June and £279.1m a year ago. Net retail sales of investment funds fell to £108.6m from £279.4m in June and £872.7m a year ago.
The IMA suggests that the fall in sales relates to the lack of investor confidence in what has been a stagnant market, coupled with increasing interest rates which have made cash an appealing alternative.
Total net sales of investment funds of £172m in July were far behind June's figure of £882m and significantly lower than £1.4bn in July 2003.
Funds under management fell by 2 per cent to £243.4bn from £249.7bn in June but were 10 per cent higher than a year ago when they stood at £221.8bn.
Total gross sales fell to £4.06bn from £4.33bn in June and £4.38bn a year ago.
The IMA says intermediaries remain the biggest sellers of investment funds, accounting for 77 per cent of gross retail sales in July. Salesforces and tied agents continued to sell the biggest proportion of Isas, with 43 per cent of the market.
The best selling sectors in July were UK all companies, accounting for 26 per cent of gross retail sales, followed by UK equity income with 15 per cent. The worst-selling sector was Europe excluding the UK.
Deputy chief executive Sheila Nicoll says: “While gross retail sales remained fairly stable in July, the data in net terms tells a very different story. Net sales continued to fall significantly from previous months.”