RateSetter has issued an update on its soon-to-launch Innovative Finance ISA product, claiming to be the first platform to have done so.
The details themselves fall broadly in line with expectation, and mirror the existing process of investing through the RateSetter platform. Investors will be able to choose between four RateSetter IFISA options, with terms ranging from 1 month to 5 years. Investors will also be able to choose between selecting their own rate (and waiting for money to be matched) or investing at the going market rate. 1 month investments on the platform currently pay out an interest rate of 2.7% per annum, with 5 year money paying 5.7%. Investing in RateSetter via an IFISA wrapper does not affect provision fund coverage. There will be no management fees for investors.
The context behind RateSetter’s decision to publish this update is interesting. As it stands, come April 6th, investors will have to choose to allocate their IFISA allowance (a maximum of £15,240) to a single P2P provider. In other words, investors cannot hold IFISA investments in, for example, both RateSetter and Zopa. Potential solutions to this problem include the Goji platform, which would allow for investment across multiple platforms. But for the time being at least, IFISA investors stand to have their wings clipped by rules which will not allow them to gain a diversified exposure to a number of platforms. It makes sense, then, for the major peer-to-peer players to begin to intensify the marketing of their respective IFISA offerings.
Another interesting facet of the IFISA debate is that peer-to-peer platforms will need to carry full permissions before becoming eligible for ISA investment. Deadline day for the submission of full authorisation applications fell on 30 October last year. However, with a colossal weight of applications to sift through, we don’t expect the FCA to begin authorising successful applicants until weeks or months after the 6 April deadline.
And RateSetter has raised yet another potential complication. ISA rules do not allow for the direct transferral of existing P2P investments into an IFISA. The platform is exploring methods making things “as easy as possible to open and fund a RateSetter IFISA”, but clearly there’s a lot to consider.
“The launch of the IF ISA will provide a massive boost for investors - we calculate that existing investors could save as much as £376 in tax per year if they are higher rate taxpayers. And given the potential for significantly better rates on offer, it’s no wonder that one in four cash ISA holders say they are considering opening an Innovative Finance ISA.”
“We’ve had strong interest from both existing and new investors so it’s great to be able to start to reveal the detail of the product – we’ll have more details over the coming weeks as we get closer to the launch.”