Higher ISA allowance boosts sales

Investing in stocks and shares individual savings accounts has rocketed since the allowance for the over-50s was increased a year ago.

Inflows into the ISAs have averaged more than £400 million a month since last October and half of investors say they would put more money away if ISA allowances were raised further.

The figures from the Investment Management Association show a renewed enthusiasm for investing in stocks and shares ISAs from people of all ages and lifestyles.

The ISA allowance was raised from £7,200 to £10,200 last year for the over-50s and in October, ISA net sales were the highest since their launch in 1999. Since October, sales have averaged £400 million each month, more than double the amount before the increase.

The ISA allowance rose to £10,200 in April this year for the under-50s and results from that month were the highest since 2001.

IMA research shows that one in three investors would invest more in long-term savings if incentives remained consistent and 44% said they would invest more if there was a lifetime tax-free allowance on Isas. Many people also said they would prefer greater flexibility to move money in and out of pensions savings.

Richard Saunders, chief executive of the IMA, comments: "Our research shows people are positive about incentives to save and the IMA figures back this up with ISA sales at the highest level for many years. There is a good chance that 2010 could be the best year ever for Isas."

It is unclear whether the Isa allowance will feature in the government's spending review on 20 October, and whether it will be reduced or frozen to help save the Treasury money. The allowance is currently set to increase in line with inflation each year, from next year.

Adrian Lowcock, senior investment adviser at Bestinvest, says if the government did cut the Isa tax incentives, it would be taking "more than a few steps backwards".