Research by data provider Moneyfacts found that between February 2021 and February 2021 the average equity-based ISA made just under 7%, comfortably above inflation.

While this was well down on the 13.55% growth seen between March 2020 and March 2021 it was still well above the measly 0.51% the average cash ISA returned - a record low. The previous year the average cash ISA return 0.63%.

Moneyfacts says many savers and investors may turn towards stocks and shares ISAs due to poor returns and to beat rising inflation, currently at 5.5%.

It has urged savers to get advice, before switching to investment ISAs.

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The best-performing stocks & shares ISA fund sector over the past 12 months, with 27.69% growth was Commodities and Natural Resources. The worst-performing sector was China/Greater China which saw a decline of -21.98%.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Savers who prefer to invest in a cash ISA will be disappointed to see the average cash ISA rate over the past year is at a record low. 

“The ISA market has also been devastated, particularly over the past decade when Government lending initiatives and the Personal Savings Allowance (PSA) triggered a mad dash for savings providers to reassess the interest rates they offered, including ISAs. Despite all of this, according to HMRC, most consumers invest in cash ISAs, whereas stocks & shares ISAs could perhaps be a more lucrative alternative. 

“The average stocks & shares ISA fund returned a growth of 6.92% over the past 12 months, which was more subdued than the 13.55% seen between March 2020 and 2021. However, as may well be obvious, this was a volatile period (20/21), with some primary fund sectors returning substantial growth, such as 57.3% (Technology & Telecoms). 

“As inflation continues to soar and the Bank of England raises interest rates, it will be interesting to see how savers will respond and where they place their cash. It’s clear to see how cash ISAs are being eroded by rising inflation, but consumers may not feel confident enough to invest in the stock market quite yet."

Separately, latest figures from InvestingReviews.co.uk reveal that the the UK has 2,000 ISA millionaires and the top 60 ISA pots average £6.2m each. The average holding for the 2,000 UK ISA millionaires was £1.4m. This April will mark 23 years since ISAs were created.