New research by Moneyfacts has revealed that stocks & shares ISAs suffered their biggest losses in a tax year since the financial crisis, as funds felt the impact of the coronavirus pandemic.
The average stocks & shares ISA fund fell by 13.3% during the 2019/20 tax year (see table below), after three consecutive tax years in which it recorded positive gains.
Only two previous tax years have seen heavier falls: 2002/03 (-19.7%) and 2008/09 (-20.3%). As a result, savers using cash ISAs would have seen more favourable returns during the 2019/20 tax year.
In terms of fund sectors, UK equity funds were particularly adversely impacted. The average UK Equity Income fund fell by 26.9%, UK All Companies funds fell by 25.5% and UK Smaller Companies funds dropped by 20.6%.
European Smaller Companies (-20.6%) and Japanese Smaller Companies (-23.6%) were the only other fund sectors that posted comparative losses. By contrast, UK Gilts (12.2%) and Global Bonds (6.7%) were the best-performing ISA fund sectors.
Richard Eagling,Head of Pensions and Investments at Moneyfacts said, “These are extraordinary times for investors, as shown by the fact that cash ISAs outperformed the average stocks & shares ISA in the 2019/20 tax year.
“The coronavirus pandemic means that stock markets are experiencing unprecedented volatility and investment returns across most fund sectors have naturally been hit hard. As dismal as the last tax year has proved to be for investors, it is unlikely to dampen enthusiasm for stocks & shares ISAs too much, as their long-term case remains compelling.”