March saw investment fund deposits hit their highest level for two years as investors tried to take advantage of allowances on offer before the end of the tax year, figures show.

The Investment Management Association (IMA) said net investments into UK-based unit trusts and open-ended investment companies were 40% higher than during February and the highest level since April 2007, standing at £1,735.5 million.

The IMA put the increase down to consumers rushing to use up their annual ISA allowances before April 6.

The amount paid into ISAs during March reached £934 million, though once people cashing in investments or moving them elsewhere were taken into account the number fell to £321 million.

However, it was in stark contrast to the previous month, when people withdrew £112.5 million more from ISAs than they invested in them.

But the 2008/2009 tax year still saw customers withdraw £975 million more from the products than they invested, although this was an improvement on outflows of £1.7 billion during the previous 12 month period.

Consumers also invested 74% more during the so-called ISA season, which ran from March 1 to April 5, this year than in 2008.

Bond funds remained the most popular asset class with investors, with £1 billion of the £1.7 billion of net sales invested into these funds.

Richard Saunders, chief executive of the IMA, said: "This year's ISA season saw significantly greater net investment than 2008.

"At the same time the strong inflows into bond funds of the last few months have been maintained. As a result, net retail sales for March were the highest they have been since April 2007."

But stock market falls have taken their toll on the total value of funds under management, including money held for institutional investors, with this falling to £347.9 billion in March, 20% lower than in March last year.

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