The total amount of new subscriptions into ISAs in 2011-12 dropped to £53.5bn, down from £53.7bn the previous year.

The amount of new money in cash ISAs was £37.7bn, down from £38.2bn the year before. This may be a result of all-time low savings rates putting savers off. In 2012, the average interest available on cash ISA stood at 2.8%, considerably lower than the average rate of 5.1% on offer in 2008.

Lower interest rates on savings accounts are down to Bank of England initiatives designed to boost lending to businesses, such as Quantitative Easing – introduced in Jauary 2009 – contributing to the fall in the amount of money invested in ISAs. By forcing down the yields available on gilts and corporate bonds in order to lower commercial interest rates, it reduced the incentive for banks to offer attractive rates to savers in order to lend the money on.

The Funding for Lending scheme – launched by the Government in 2012 – is also likely to have a negative impact on the amount of money put in ISAs, as the scheme is also driving down interest rates.

Mark Giddens, head of private client services at UHY Hacker Young, said: “Because the Funding for Lending Scheme offers banks money at a very low cost in order to encourage them to lend to small businesses, this means they have no real incentive to offer high interest rates to attract money from savers.

“Low interest rates are already making many cash ISAs almost worthless to savers, as savings are being eroded by inflation.

“Unfortunately, with many predicting that the Funding for Lending scheme will continue to keep interest rates low, the drop in ISA savings we have already seen may be the beginning of a worrying trend.”

UHY Hacker Young research shows UK savers are losing nearly £18bn a year as inflation continues to erode away the interest earned by their savings and current accounts.

According to the Office for National Statistics (ONS), the UK inflation rate was 2.8% in March 2013, while a typical ISA savings rate stands at 1.7%.

The decline in the amount of money being saved is a big concern, as the Government is keen to increase the level of savings.

Giddens added: “A long term decline in the amount of money being invested into cash ISAs is extremely worrying, as these accounts have traditionally been the most tax efficient and easily understood ways for people to save. For many people ISAs are their only savings.

“With interest rates low – and even worse – substantially lower than the rate of inflation, savers are struggling to find a sensible and safe way to make their savings grow.”