Sales of Isas flounder as equities stay unpopular

This year's Isa season, which ended at the weekend, is expected to turn out to have been a flop.

This year's Isa season, which ended at the weekend, is expected to turn out to have been a flop.

Retail investors continue to shy away from equity investing. Some fund managers had kept their phone lines open until midnight on Saturday to handle last-minute Isa applications right up to the end of the tax year, but sources say Isa sales have floundered in the past three months.

Net sales of Isas in February were down nearly 40 per cent on last year, according to figures from the Investment Managers' Association. Clare Arber, a spokeswoman for the trade body, said March, too, had "gone very quietly".

Fund managers in the past have thrown millions of pounds at advertising their Isa funds in the run up to the end of the tax year, when many investors rush to use up their tax-free saving allowance.

Gordon Davidson, managing director at Jupiter, said: "Sales are drastically down due to weak investor sentiment. Isa sales have, however, been picking up throughout March." He said its distribution fund, which combines equities and bonds, had been popular.

A third of advisers have seen their Isa business more than halve this year, the Association of Investment Trust Companies said. Last week its poll of 150 independent financial advisors found 64 per cent of investors are sticking with UK funds. Investors who have gone into the market have done so through equity income funds. Gilts and bonds have pulled in a third of Isa investments.

Research by the AITC showed that at the end of March – despite a burgeoning equity rally – 63 per cent of investors had not used their Isa allowance in 2003 and nearly a fifth thought the FTSE 100 will go below 3,000 in the next three months.