Savers face the final countdown

If you still haven't bought an ISA, time is running out. But don't rush into anything that you'll regret later.

There is still time to open an individual savings account (ISA) before the end of the tax year.

There is still time to open an individual savings account (ISA) before the end of the tax year. But if you haven't yet decided where to invest your annual £7,000 tax-free allowance, you'll need to get a move on, as the absolute deadline is midnight on Thursday.

Many of us are expected to forget this: according to research from Fidelity Investments, only 16 per cent of people are aware that 5 April is the end of the tax year. If you don't invest your money by then, you will lose this year's allowance, as it cannot be carried over.

Recent figures from the Association of Unit Trusts reveal that ISA sales are down 29 per cent compared with this time last year. Investor confidence has been severely hit by stock-market volatility in recent months, while the stock-market meltdown just over a week ago further exacerbated the situation. As a result private investors seem to be avoiding equities by piling their money into mini-cash ISAs.

The Halifax reports that it is currently receiving a staggering number of mini-cash ISA applications – an average of 6,500 a day, up 20 per cent on last year. It certainly appears as though investors would rather opt for the security of cash than take a punt on the stock market. However, if you avoid equities your returns will be lower than if you invested in a managed fund.

Fred Cleary at Barclays Capital believes that in the current climate "opting for cash in the near term and then increasing equity weighting perhaps towards the end of the year" could be an effective strategy for many investors. There is also a strong argument that now is a good time to invest in equities because they are obviously much better value when the markets are low. But bear in mind that even though the FTSE 100 was up last week, there is a general feeling that the markets haven't yet bottomed out and there could be further falls to come before a recovery. If this concerns you, or if you don't know which fund to opt for, you shouldn't rush the decision and put money into a fund that you might regret having chosen later.

There are various opportunities enabling you to hold your ISA allowance in cash, giving you time to decide where to invest.

Some investment houses offer funds that allow you to hold your money in cash until you have decided which equities you want it invested in. For example, Perpetual pays interest of 4.75 per cent gross on such a fund but you will be taxed on this money until you move it into equities, when returns will become tax-free.

However, if you stash your money with a particular investment house, your eventual investment will be limited to one of its funds. To avoid this, you could opt for a self-select ISA, which enables you to hold your money in cash and pick a mix of managed funds – shares, gilts and bonds – once you decide to invest it. Barclays' Stockbrokers, Charles Schwab, NatWest Stockbrokers, Killick & Co, Selftrade, Stocktrade, iDealing, DLJDirect and Hargreaves Lansdown are among those that offer a self-select ISA allowing you to do this. The interest paid on the cash varies, so it is worth shopping around to compare this, along with any charges. For example, Hargreaves Lansdown pays 5.5 per cent gross if you invest the full £7,000, but Schwab only pays 2.75 per cent. If you can possibly avoid it, don't hold your investment in cash for too long before investing, as all gains will be taxed.

Fidelity's FundsNetwork and Egg's online fund supermarket (www.egg.com) also offer ISAs that allow you to spread your allowance between a number of funds. These are not strictly self-select ISAs, as you can invest only in managed funds and don't have the option of investing directly in equities or put- ting your money in gilts and bonds.

The final deadline by which you have to submit your application will depend on the individual product provider. On the whole, banks and building societies will accept applications until branches close on Thursday, although there are some that have made special arrangements by providing drop-off points at various locations around the country (contact your ISA provider for more information). But most investment houses will allow you to apply right up to the very last minute. If you are posting an application, you should send it first class by the end of tomorrow to ensure that it arrives on time.