Advisers ‘ISA dumping’ due to volatility fears

Advisers opened and filled ISA accounts to max out annual allowances in a single transaction in March due to the impact of volatility gripping markets in the first quarter of this year, according to a new report.

Over a quarter (27%) of new stocks and share ISA deposits on the abrdn Wrap in the final week of the last tax year had the maximum £20,000 paid in.

This compared to 29% in 2021 and 20% in 2020.

In March almost a third (31%) of new stocks and shares ISA deposits on the Wrap platform were filled completely. This compared to 21% opened and fully filled in February, and 33% in March 2021.

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Jonny Black, strategic director at abrdn, Adviser, said: “This year’s trend in ‘ISA dumping’ is likely a result of advisers and their clients seeking to mitigate the impact of volatility that gripped markets in the first quarter of this year, and waiting to see what would be announced in the Chancellor’s Spring Statement. 

“While some clients may have been rushing to make the most of the year’s ISA allowance, in most cases this ‘rush’ will have been thoughtful, effective, tax planning in action.

“The strategy of filling ISAs last-minute will of course not be right for every client. Advisers need to ensure that paying in one go is right for a client’s appetite for risk, and in some cases, it will be better to feed funds in over a tax year to help mitigate exposure to market fluctuations.”

abrdn also a 60% increase in the number of stocks and shares ISA millionaires in accounts invested in the Wrap between April 2021 and April 2022.

ISA millionaires were also more active with their investments, with greater year-on-year variation in the top ten funds where their assets were invested when compared to general ISA accounts.

The abrdn Wrap has advised assets under administration of £76bn (as at 31 December).

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Advisers ‘ISA dumping’ due to volatility fears