Fresh low for Isa funds

THE amount of money flowing into Isa funds plunged to a fresh low of just £25m in August, down nearly 70% from £77m a year earlier, marking a new phase in the long decline of the tax-free funds.

The £25m figure is a long way from the peak of the dotcom investment bubble in March 2000 when eager investors shovelled a record £2.3bn into Isas in just one month.

The Investment Management Association, which published the figures, said the latest sales slide in August was largely due to investors cashing in their holdings rather than a significant fall in gross sales.

'Although August is traditionally the quietest month of the year for sales, this summer's figures have undoubtedly been poor,' admitted Richard Saunders, chief executive of the IMA. 'It would seem that investor confidence remains low, as high levels of redemptions continue to have a large impact on the Isa market in particular.'

Once the must-have accessory for every aspiring investor, Isas have endured a slow decline in recent years. A fall in global stock markets – the UK's FTSE 100 remains 35% below its 1999 peak of 6930 points – has largely been blamed.

However, independent financial advisers and fund managers have repeated a warning that a complicated change in the tax-treatment of Isas has further damaged their attraction.

Previously, Isa funds investing in shares received a 10% boost on any income paid. The Government scrapped the perk in April, a move that is expected to cost investors £200m this year alone.

Figures for total sales of funds to private investors, which includes funds sold with or without an Isa wrapper, gives some support to the claim - the figure was £69m for August down from £85m in July, a far smaller decline than for Isas alone.

The most popular type of fund was UK equity income trusts. The least loved was the UK all companies sector, home to most British growth funds.