Inflation since April 2020 has averaged 0.78pc, surpassing the typical ISA rate during that time, meaning £1,000 saved last April has lost around £1.50 in real terms.

Investors performed much better over the period, enjoying an average return of 13.5pc from stocks and shares ISAs over the same period, according to the analyst. This was in contrast to the 13.3pc loss investors suffered during the previous tax year, after stock markets crashed at the start of the pandemic.

A saver who put £1,000 in a stocks and shares ISA last April would be around £136 better off than a cash ISA saver once inflation is taken into account. Payouts on cash accounts have been dropping since the beginning of the pandemic when the Bank of England cut its Bank Rate to a record low of 0.1pc.

Nevertheless, savers have deposited more money into cash ISAs than ever before. Balances peaked in May last year at £302bn and ended the year slightly below this record at £297bn. Savers also enjoyed a slight reprieve last week as inflation dropped to 0.4pc.

However, most cash ISAs still struggle to beat this rate. The only easy-access cash Isa that beats inflation is from Al Rayan bank, offering a 0.6pc expected profit rate. Accounts that match or beat inflation require savers to lock their cash away for up to two years – putting them at risk of losing out if savings rates were to rise in the interim.

The best cash ISA rates, which require savers to lock their cash away for five years, pay between 1pc and 1.1pc.

Rachel Springall, of Moneyfacts, said: “This year’s performance across stocks & shares ISAs is in clear contrast to the 2019/20 tax year where on average over that period there was a loss of -13.3%. Not only was this beaten by the average cash ISA rate over the equivalent period at 1.18% but the performance was the worst seen since the financial crash.

“The stock market has since bounced back, with the average stocks & shares ISA returning 13.55%. However, the cash savings market has been devastated over the same period and now the average cash ISA rate has reduced over the past year to a record low of 0.63%.

“Savers who are still debating what ISA to choose and who may be risk adverse could still turn to a cash ISA but its clear to see why some may change their mindset and opt for a stocks & shares ISA instead. However, it is important that savers understand that past performance is not guaranteed for the future, so seeking advice and assessing their level of risk would be wise. According to a recent study by the Financial Conduct Authority (FCA), a significant loss could have a fundamental lifestyle impact on 59% of DIY investors who have less than three years’ experience of investing.”

She added: “Despite cash ISA returns falling, it is hoped this will not distract consumers from continuing to save each month. A recent study by Coventry Building Society showed encouraging signs that over 92% of Millennials (those aged 25 and 34) have saved something each month compared to 78% of those aged 55-64, but whether this sentiment continues in the months ahead is unknown as the country eases out of lockdown.

“Whilst many consumers are eligible for the Personal Savings Allowance (PSA), it is still vital savers consider an ISA for the long-term tax-free benefits they provide and to keep saving to ensure they can cover any unexpected events.”