Nervous Savers Cause ISA Slump

Many savers are transferring their money out of stocks and shares-based Individual Savings Accounts (ISAs), figures from the Investment Management Association (IMA) has shown.

Falling stock markets caused by the credit crunch - with the FTSE 100 falling by a three-figure margin over the last week alone - has seen many investors look to put their savings into "safer" accounts, such as cash.

According to the IMA, around £198 million was taken out of the tax-free stocks and shares accounts in May, ten per cent more than for May 2007. Moreover, the share of funds held in ISAs was also found to have dropped over the year, falling from 30 per cent to 19 per cent.

Speaking to the Guardian, IMA chief executive Dick Saunders blamed the early-2000s dot com crash - which saw many ISA savers lose money due to stock market drops for the first time - for a long-term lack of confidence among savers for stocks and shares. "The retail investor has yet to come back to the market since the tech crash," he commented. "People have been investing in property instead."

The maximum ISA allowance per annum currently stands at £7,200, of which up to £3,600 can be put into cash.