ISA sales fall 25% as savers stay nervous

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Net sales of individual savings accounts (ISAs) fell 25 per cent year on year, as nervous small investors continued to shun volatile stock markets, industry figures showed yesterday.

Net sales of ISAs tumbled to £639m in May, from £854m the previous May, the Association of Unit Trusts and Investment Funds said.

April's figures showed a similar fall in retail sales, while the first three months of the year saw a drop of about 40 per cent in ISA sales on 2000. Overall net retail fund sales fell to £797m in May, from £1.25bn a year earlier.

Enticed by the long boom in equities and by the explosive growth in technology, media and telecoms companies, many small investors have plunged into the stock market in the past couple of years, only to get their fingers burned as the TMT bubble burst. With growth in the US stuttering, the threat of inflation hanging over Europe and Japan yet to pull out of its decade-long slump, many are waiting for signs of a sustainable recovery before returning to the stock markets.

Wariness among retail investors resulted in increased investment into bond funds, while savers shunned more risky Japanese equities and UK smaller company funds in May.