Cash savings are not a 'viable alternative' for the clients of one stockbrokers.
Britain's consumers are showing a new willingness to switch their cash savings for stocks and shares, new ISA research from Barclays Stockbrokers has revealed.
According to the provider, 85 percent of clients are planning to use their ISA allowance this tax year. New account openings were also found to have increased by 37 percent in 2008/09 and top-up contributions into existing accounts were found to have gone up by 69 percent.
Still more strikingly, 61 percent of trades handled by Barclays Stockbrokers were buys rather than sells - signifying that investors are confident that the markets will recover over the near future. This sentiment comes despite a very poor recent history for shares investments - the FTSE 100 dropped by 30 percent across 2008 due to the financial crisis and is still around 40 percent below its 2007 highs.
The attractiveness of cash has been limited recently by the Bank of England's decision to slash interest rates from five percent to an all-time low of just 0.5 percent. These cuts have been reflected in rates offered by many cash savings account providers.
Barbara-Ann King, Head of Investments at Barclays Stockbrokers, commented: "Whilst markets have continued to be extremely volatile, and some investors have taken advantage of this, many others have been more cautious. As interest rates have languished at record lows, cash is not viewed by many as a viable alternative."
She added: "It is encouraging that our clients have taken the bull by the horns and made sure they take advantage of not only their tax free allowance but also the potential returns that can be gained from investing in equities. It is also very encouraging that our investors recognise the benefits offered by ISAs and so have actively taken up their allowances in order to maximise the returns that they generate."
Changes to ISA allowances for the 2010/11 tax year were announced in last week's Budget. The maximum tax-free allowance is to increase from £7,200 to £10,200, of which £5,100 can be held in cash.
Over-50s can also gain access to the new threshold this year.
