David Prosser: Savers miss out on the market's rise

Outlook: There are all sorts of reasons why the stock market continues to test the highs that were last seen in June 2008, but it is safe to say that demand from private investors in the UK is not one of them. With around 10 days to go until the end of the tax year – when investors will lose their 2010-11 individual savings account (Isa) allowance if they do not use it – there is little evidence that savers have regained their faith in the stock market as a vehicle for long-term financial planning.

The days when rival investment fund providers launched enormously expensive advertising campaigns in the run up to the end of the tax year are long gone. While there is still an "Isa season", during which the financial services industry does its best to persuade savers to part with their money, it is now the competition for cash accounts, which takes 80 per cent of savers' cash, that is most competitive.

You can see why. Though the UK stock market hit its nadir 12 months ago, retail investors have been reluctant to move back into equities. Data from the Investment Management Association reveals that in the 11 months between last March and January this year, the most recent month for which figures are available, property or corporate bonds have been the investments of choice for retail buyers on nine occasions.

In January, for example, investors pumped the best part of £1bn into property and bond funds while actually withdrawing £210m from funds investing in the UK stock market. The figures for investments in funds made within tax-free Isa wrappers broadly reflect these trends.

It was ever thus, of course. In almost every stock market cycle you care to mention, retail investors have tended to be last in and last out – often missing out on the upside of a recovery and getting caught out by the subsequent downturn.

The complicated Isa rules do not help. This year, the maximum investment in an Isa is £10,200 if you are over 50, but £7,200 if you are younger. You can put the whole allowance into shares, or split it equally between shares and cash. But you can't put the whole amount into Isas. Are you still with me?

Still, it is disappointing that so many savers have missed out on the recovery in the stock market over the past 12 months, a resurgence that has delivered a return of getting on for 60 per cent.

Will that recovery continue? Well, Crispin Odey, the highly regarded hedge fund manager, certainly thinks the market has further to rise. The briefing note he issued yesterday pointed out that European equities remain much more cheaply priced than bonds and property. Isa investors, however, seem disinclined to believe him.