The fall in ISA sales coincides with a tumultuous period for investors during which time equity markets have been perceived as risky and volatile and fixed interest over-priced.

Many peoples’ personal finances have also taken a beating as mounting household bills, stagnant wages and rising inflation have led consumers to tighten their belts and left them with less to save.

Patrick Connolly of Chase de Vere, the independent financial advisers, said: “People might be more concerned with paying off debt or keeping money available in cash to provide absolute protection in case it is needed at short notice.”

This latest drop in sales represents an on-going trend; since their launch in 1999 applications for stocks and shares ISAs are down from 4.57 million to 2.9 million in 2011/2012 – a fall of 36%.

This is perhaps unsurprising as, since ISAs were launched, investors’ confidence in stock markets has been tested through the dotcom bubble and financial crisis.

However, ISAs remain a popular tax efficient way to save and are still being used in large numbers. ISA funds under management for the tax year 2012/13 totalled £121bn based on data from fund companies and five fund platforms.

For those investors who did opt for a stocks and shares ISA, risk appetite was high for much of the 2013 ISA season and remained resilient as tensions rose over North Korea and during the messy bailout of Cyprus.

Rumours of a great rotation out of bonds may have been slightly premature as Strategic Bond funds were the bestselling for the first three months of the year. The Global Equity Income sector saw the biggest rise from the 12th most popular sector to the 3rd.

Adrian Lowcock of Hargreaves Lansdown said this trend was reflected in his firm’s sales, with 6 out of the 10 top selling funds in the first three months of the year being equity income funds.

Interestingly, sales picked up, compared with the previous year, in the final weeks of the tax year, as investors who had waited all year for the right investment opportunities finally decided, as they do most years, that it is better to use their ISA allowance than to lose it.