By the time you read this, the Isa rush will be over and we will start to see advertisements encouraging investors to take advantage of the new tax year’s (increased) Isa limit and exhorting them not to wait till the last minute.
It is an inevitable cycle. It happens every year despite all the advice that people would probably be better off dripfeeding their money into stocks and shares over time to avoid potentially investing at the top of the market. But last-minute investment is better than none at all, particularly at a time when we are constantly reminded that we are not saving enough.
An Investment Management Association survey of 595 equity Isa investors in February showed there is good appetite for Isa investing and a strong belief in the Isa brand.
We just need to get this message out to those who are not making use of them.
Seventy per cent of Isa investors thought it was important to take out an equity Isa each year. The highest support for Isas came from the 35-54-year-old group and families with young children, with 76 per cent of each group saying it is important to take out an equity Isa each year, regardless of the amount they were able to invest.
One-third of equity investors also said they planned to take full advantage of the increased allowance for this tax year but 55 per cent did not know the level of the current tax year’s annual allowance, with 41 per cent believing it to be below the correct allowance of £10,200.
We will not know the true extent of the last-minute rush – people buying from March 1 until April 5 – until the end of May when we have gathered all our statistics together but early signs from the beginning of the year could be seen as a positive indication of what will happen.
Net Isa sales for January and February amounted to £49m, which is the second-highest level – after 2010 – since 2002. Between 2003 and 2009, in all years except for 2004, there were significant outflows in net Isa sales in January and February. That said, each of those years still saw healthy inflows in March and the first few days of April, so, hopefully this year’s inflow so far is a sign that things are looking up at least a little.
One very good reason why investors should be thinking about trying to maximise the return on their money is the low-interest-rate environment we have been in for some time now. Keeping money in the bank not only does not pay but it also loses value once you take inflation into account.
The IMA’s wider survey of 1,084 investors showed that inflation was the biggest concern among investors when they were asked to rate different risks to their money.
At times like this investors must be encouraged to invest, to make the most of their money and to do so in the most tax- efficient way. What better product than an Isa to get them going?
Mona Patel is head of communications at the Investment Management Association