Savers pay record amount into investment funds

Consumers paid a record amount into investment funds during 2009 as savers looked for an alternative home for their cash.

Net sales of UK-based unit trusts and OEICs (open-ended investment companies) soared to 25.8bn during the year, the highest level since records began in 1992, according to the Investment Management Association (IMA).

The figure was 45 per cent higher than the previous record set in 2000, when new investments totalled 17.7bn, while it was six times higher than 2008's figure of 3.8bn.

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Sales finished the year on a strong note, with 2.2bn of new money paid into unit trusts and OEICs during December – the ninth consecutive month during which the figure has topped the 2bn mark.

An IMA spokeswoman said: "A combination of factors led to record net retail sales in 2009.

"Low returns on savings accounts caused people to look at putting their money into other assets.

"At the same time, the recession caused them to increase their savings levels."

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Investors favoured bonds during the first half of the year, but

equities experienced a resurgence during the second half of 2009.

Overall, 9.9bn of new funds were invested in bonds during the year, while 7.3bn went into equities, a sharp turnaround from 2008, when people withdrew 1.3bn more from equities than they invested.

The surge in investments, combined with strong stock market growth during the year, also helped to push up the value of funds under management to record levels for a year end.

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At the end of December funds under management, including money held for institutional investors, totalled 480.8bn, dwarfing 2008's total of 361.7bn.

ISAs also enjoyed a strong performance as investors were once again attracted to the tax benefits of investing in the products.

Net ISA sales, which strip out people cashing in their investment or moving it elsewhere, reached 2.8bn in 2009.

The figure was the highest since 2001 and followed five consecutive years during which people had withdrawn more from ISAs than they had invested.

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