One fifth of ISA investors plan to use ETFs

Around one fifth of ISA investors plan to use ETFs in the next tax year to provide instant diversification and low cost market access, Barclays Stockbrokers says.

The firm's head of investments Barbara-Ann King says in this low interest rate environment, investors should also develop diversified portfolios in order to obtain returns.

She says: "Our clients are responding effectively to the challenges of rapidly changing markets by branching out from the traditional shares, gilts and bonds and utilising investment instruments such as exchange-traded funds."

A survey by Barclays Stockbrokers shows around 81% of its investors intend to invest in equities within their ISA next tax year, while 34% plan to invest in funds and 21% ETFs.

It says 71% of investors are preparing to take advantage of the increased ISA allowance in the next tax year, with 59% of this portion stating this is to protect more assets from tax.

The survey reveals nearly a third of clients will invest the new allowance to gain better returns than what can be achieved on cash, especially as the low interest environment continues.

King adds the current tax year allows for investments of up to £7,200 per annum or up to £10,200 for investors over 50. The portfolio will be free from capital gains tax on any growth, and income tax on dividends.