The Office for Budget Responsibility (OBR) has laid bare the poor take-up of successive government launches of new variations of the ISA, marred in part by a lack of providers able to offer the schemes.
In documents published alongside today's Budget, the OBR said that the Help to Buy, lifetime and innovative finance ISAs had all suffered a much poorer take-up than anticipated by the government.
The lifetime ISA, one of the flagship announcements in George Osborne's last Budget in 2016, was launched in April this year.
Under the scheme, available to those aged between 18 and 40, the government will top up savings with a 25% bonus if the money is used to buy a home or for retirement income from the age of 60. Savers are allowed to invest up to £4,000 a year.
The OBR said take-up of the scheme had been 'sluggish, with very few accounts available to savers' and cut its forecast for government bonus payments over the next five years by £2.6 billion.
The lifetime ISA was preceded by the Help to Buy ISA, which launched in December 2015 and likewise offers a 25% government top-up when the savings are used to buy a first home.
Original costings estimated £700 million in government bonus payments by the end of the next year but so far the government has paid out just £77 million.
The OBR has revised down its forecast for expenditure this year to £110 million, and estimated the government would be spending £1.6 billion less than previous thought on the scheme over the next five years.
The innovative finance ISA has meanwhile proved the biggest flop. This scheme, announced in the 2014 Budget and launched two years later, allowed savers to hold investments from peer-to-peer platforms.
HM Revenue & Customs had estimated around £800 million of savers' money being ploughed into these schemes, but the latest figures show just £20 million deposited from 2,000 accounts.
'One likely reason for this shortfall is the subsequent Budget 2015 measure on the personal savings allowance, which allowed many investors to retain interest income tax-free without the need for an ISA,' the OBR said.
'A second reason for lower-than-expected take-up reflects some of the largest platform providers taking longer than expected to gain authorisation from the Financial Conduct Authority.'
ISA allowance frozen
Chancellor Philip Hammond has so far showed no sign of sharing his predecessor's enthusiasm for expanding the reach of ISAs.
During his six years as chancellor, as well as introducing new forms of ISA, Osborne also oversaw a near-doubling of the subscription limit, to £20,000 in this tax year.
But Hammond has resisted raising the limit even in line with inflation, after last year's big hike from £15,240.
'It seems clear now that in the wake of this one-off hike last year, the long-established practice of adjusting the ISA allowance each year for inflation is now over,' said Jason Hollands, managing director of investment group Tilney.
'With consumer price inflation running at 3%, many investors may have been anticipating a £600 increase.'