And if you are investing for the longer term, around five years or more, stocks and shares are certainly where the action is. Martyn Page, investment adviser with financial advice network Countrywide, says the message is sinking in that maxis are more or less PEPs in disguise. As a result, sales are looking a little more rosy.
Even the most popular fund managers under PEPs have remained pretty much the same. Mr Page says one thing has changed: the greater freedom given to ISAs to invest in international markets has brought a range of new funds into the fold. "You can now invest internationally as you could not before. With Nasdaq shares now flying high everybody is launching technology funds. Some are blatantly oppor- tunistic, but not all. I like the Close Fund Management's FT-SE techMARK 100 Fund."
Other popular technology funds include Aberdeen Technology, which has grown 458.7 per cent over the last five years, and Henderson Global Technology with 363 per cent growth.
The Framlington NetNet Fund, an actively managed international fund targeting up to 90 internet-related companies in the US, Europe and worldwide, is also popular.
Mr Page says corporate bond funds are also popular maxi ISAs, particularly among income seekers. Corporate bonds are less risky than investing directly in shares; what you are buying is a loan issued by a company to raise money for expansion.
Popular corporate bond funds include those run by M&G, which offers a standard and a high yield fund, and CGU. Income seekers have been served well by ISAs. Jupiter Income has continued its successful run - the fund has grown 22 per cent over the last year.
One thing you should always look at is the level of charges on the fund and how you can reduce them. The Government has sought to restrain greedy fund managers with its CAT standard system, which limits charges on approved funds to 1 per cent annually with no further costs. Most ISA funds still cling to the traditional approach of hitting investors with initial charges of at least 5.25 per cent.
Research from an independent survey commissioned by Norwich Union shows how these charges hit the amount of money you receive. A one-year backdated comparison shows that the average CAT standard fund outperformed the average non-CAT fund by 7.35 per cent. Out of 22 CAT funds 21 beat the average for non-CAT funds. High initial charges will have a disproportionately damaging effect in the early years of an investment but the research showed the performance gap widened rather than narrowed over the 12-month period.
If your favourite fund does not meet CAT charging criteria you can almost certainly get most of the charges rebated by purchasing it through an execution-only discount house such as Chelsea Financial Services or MGP Direct.
n Contacts: Chelsea Financial Services, 0171-351 6022;
MGP Direct, 0800 783 0768.