More than a third of savers plan on relying on their Isas for the majority of their income at retirement, according to a MetLife study.
The study, involving a sample of 1,071 employed adults, found that more than a quarter (28 per cent) of over-55s said they were considering using Isas for retirement income.
In addition, two-thirds of those surveyed said they only save in cash Isas – despite just 10 per cent stating they are happy with the rates they receive, while 55 per cent said otherwise.
What is more, around 21 per cent of savers said they are making more use of Isas for retirement planning following pension freedoms.
Simon Massey, wealth management director at MetLife UK, said the increase in annual tax free Isa allowance from £15,240 to £20,000 in April this year makes the vehicle a real option for retirement planning.
He added: “But it is worrying that with so much Isa saving focused on cash Isas that so few savers are happy with the rates they are earning. However, it is understandable that many are nervous about investing their money in a traditional stocks & shares Isa when markets are uncertain.
“The Isa market attracted more than £58bn in contributions last year and the rise in contribution levels will provide another boost, but there has to be real choice aside from the higher return but riskier stocks and shares Isas and the low rates of cash Isas.”
Mark Loran, IFA at Chester-based Platinum Financial Services, said: “I think that more people will look to use their Isa savings to top-up their pension income in the future.
"Higher net-worth clients in particular who hit their annual allowance and are likely to hit their lifetime allowance will most likely seek to make the most of the Isa mechanism."