What are your options?

Isa providers face a hard-sell this Winter. Falling interest rates and volatility in the stock markets mean many investors will be tempted to sit on their hands. They were voting with their feet even before January and the worst ever start to the year for the FTSE 100, not forgetting that cash isas have increased ten fold in the last quarter with the Investment Management Association recording ISAs increase in popularity

The Building Societies Association (BSA) has said that consumers should consider ISAs because they provide a "flexibility of choice" and are the most "tax-efficient" savings.

Rachel Le Brocq, spokesperson for the BSA, said that those who invest in an ISA have the flexibility of choosing a cash and/or stocks and shares investment depending on their "attitude to risk".

She explained: "People obviously are having some worries about the flexibility of their money, and that stocks and shares obviously go up and down with the stock market, so we are seeing people putting their money into cash ISAs."

According to financial website moneyfacts.co.uk, building societies account for over 38 per cent of all cash ISA balances and the average return on a £3,000 cash ISA for this tax year was £164.51.

Latest figures from the BSA show that people are taking a cautious approach to their finances and are investing their cash in savings accounts.

In the first half of 2008, building societies experienced a record savings inflow of £6,296 million compared to £3,862 million in 2007.
In the first month of the year things got worse, with investors withdrawing £68.4m from Isa funds. But for those with money left to put away it still makes sense to use at least some of this year's Isa allowance, because as Stephen Marriott, research analyst at Best Invest, puts it: "if you don't use it, you lose it".

Cash as king

Certainly, you have nothing to lose by putting up to £3,000 in a cash Isa if you haven't done so already. Rule changes which come into effect in April will mean you can transfer money from a cash Isa into shares at a later date, so if you start to feel more confident about the market you can move your money. As it is, cash beat all major asset classes last year, according to Barclays, and despite the recent base rate cuts there are still some good offers available. "The banks are looking to raise cash so there are some attractive deals," says Martin Bamford, director of independent financial adviser (IFA)