ISAs make up 18pc of all authorised funds under management in the UK. Savers can currently invest up to �10,680 a year in the tax-efficient products, which can either be invested into stocks and shares, or partly in cash, with the remaining balance in stocks and shares.
Jane Lowe, director of Markets at the IMA, added: "The last two tax years have together seen a big jump in ISA inflows to more than �7.5bn. This coincides with two increases to the annual allowance in October 2009 and April 2010 and compares starkly to ISA outflows of over �5bn over the preceding five years.
"In terms of net retail sales equity funds have remained the top choice for retail investors over the last five months."
Elsewhere, the IMA revealed that UK domiciled funds under management grew to �583.2bn at the end of the tax year, from �509.9bn a year earlier.
In March, the leading asset class was equities with net retail sales of �739m, the fifth consecutive month that equities outsold bonds. Bonds had been the most popular asset class throughout the previous four months. In terms of distribution, �5.4bn worth of sales were made through intermediaries in March, �4.2bn through "fund platforms" and �1.1bn through direct channels.
Alan Easter, director of advisory Willis Owen, said: "These figures show that ISAs are clearly still valued by investors, which is good news given how tough conditions are at the moment. Despite the squeeze on finances, more people are attracted by the tax-free wrapper that investment ISAs offer, and the potential for growth, rather then leaving their savings sitting idly in a low-interest bank account."
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