The total number of Isas opened between April 2013 and April 2014 fell for the first time since 2011 due to a drop in demand for cash accounts, according to the Office for National Statistics (ONS).
The ONS reports that the total number of new Isas opened in the last tax year fell by 8% to 13.5 million, from 14.6 million the previous year. This follows two years of successive increases in the number of new Isas opened.
This was driven entirely by a fall in the number of cash accounts opened, which decreased by more than 10% from 11.7 million between April 2012 and April 2013 to 10.5 million during the most recent tax year.
In contrast to this, the number of stocks and shares Isas opened in 2013/14 increased slightly from 2.9 million in 2012/13 to 3 million, while the number of Junior Isas opened increased dramatically from 296,000 to 432,000 this year.
In addition, although the number of new cash Isas fell, the average amount invested rose from £3,501 to £3,704 this year, as did the average amount invested in stocks and shares Isas, which increased from £5,629 in 2012/13 to £6,163.
The total amount of money subscribed to both cash and stocks and shares Isas fell from £57.4 billion in 2012/13 to £57.3 billion.
Commenting on the fall in the number of new cash Isas opened, Richard Watkins, certified financial planner at Close Brothers Asset Management, says: "It's likely that for many people, paying down debt has become a top priority, but long-term savings cannot be left on the backburner.
"It's important to remember to strike a balance between saving and borrowing so that people can achieve their lifestyle and retirement goals, not to mention having a financial buffer in place for unexpected costs."
On the upturn in the number of stocks and shares Isas opened, Watkins recommends savers be mindful of the risks involved in investing, adding that it is important investors "understand their risk appetite as well as prospective returns and ensure they have a balanced portfolio that matches this".
Danny Cox, head of financial planning at Hargreaves Lansdown strikes a more celebratory tone, commenting that it is "unsurprising" cash Isa numbers are down, given the current record low level of interest rates being offered.
"The combination of low cash Isa rates, improved confidence in the markets and a higher Isa allowance has boosted stocks and shares Isas to a record year of investment. The increase in average subscriptions to record levels also shows the importance UK savers and investors put in tax-free Isas," he says.
On Junior Isas, Cox adds that he believes account numbers will continue to grow at their current rate, boosted by the ability of child trust fund holders to transfer into Junior Isas from April 2015.
This article was written for our sister website Money Observer