The FTSE 100 index of leading shares hit its lowest level since March 2003 last week, prompting more pain for investors just as many were gearing up to invest this year’s Isa allowance.

The Footsie closed the week at 3,531, down 39% on the year and just 244 points above the low of 3,287 it hit ahead of the Iraq war in March 2003.

However, there is evidence some investors see the lows as a buying opportunity and are moving money out of cash Isas into stocks and shares plans.

Building societies said savers pulled a net £127m from cash Isas in January, against net receipts of £65m a year earlier.

The move out of cash has been given added impetus by a change in the Isa rules. You can now move cash Isas from previous years into shares without affecting this year’s allowance. You could transfer £3,000 from a previous year’s cash Isa on top of your £7,200 allowance.

A survey by fund supermarket Interactive Investor found one in three savers was considering moving into a stock and shares account.

Rebecca O’Keeffe of Interactive Investor said: “Experts and private investors remain divided on the market outlook. There are certainly those who see this as a great time to buy and our regular traders have been extremely active during the recent turbulence.

“There are always vagaries in the equity market but there are steps you can take to limit your risk. Having a long-term horizon should allow you to ride out any possible short-term market dips. And investing regularly does help to remove some of the market-timing concerns.”

Although few experts believe the next few months will be easy, equities are more likely to outperform over the next decade than over the average 10-year period due to the market falls, according to a Barclays Capital report.

Tim Bond, one of the report’s authors, said: “Prospective returns from equities are at the most attractive levels for some 20 years in the US and over 25 years in Europe and the UK.”

The report also showed that while equities have underperformed gilts and cash over 10 years — and gilts over 20 years — shares have beaten both over 30 and 40 years.

Over the past three decades, equities have delivered an average annual real return of 7.1% a year compared with 5.6% for gilts. Over 40 years, shares have returned 4.38% a year compared with only 3.3% on gilts.

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