Investors flock to Innovative Finance ISA

By Moriah Costa on 24th February 2017

P2P/Marketplace Lending

Lending platforms are seeing a flux of ISA turnover, as firms and investors rush to meet the tax year deadline.

Investors flock to Innovative Finance ISA

As the Individual Savings Account deadline looms, many investors are looking to Innovative Finance ISAs as a viable alternative to cash and stock ISAs.

Some alternative financing firms have seen as much as a third of their total investments from transfers of old ISAs into the newer IFISAs.

“We’re definitely seeing the expansion, the sort of reaching into the mainstream,” said Bruce Davis, cofounder of funding platform Abundance Investment.

The IFISA was launched by former Chancellor George Osborne in April 2016. It allows individuals to include income from P2P platforms as part of the current £15,240 allowance, which will rise to £20,000 in April.

Only a dozen or so platforms have been approved to offer the ISA but there has been a rush of approvals as firms are trying to get approved before the April 5 tax-year deadline. While smaller platforms have been approved, the three largest alternative lenders, Zopa, Funding Circle and Ratesetter have not yet gotten regulator approval.

Abundance launched its IFISA in November 2016 and has about £6m in investments and 1,300 customers, Davis said. About a third of its investments are from ISA transfers.

The platform is also planning a marketing push across the UK in the coming weeks, he said.

Karteek Patel, CEO of peer-to-peer lender Crowdstacker, said there is still a lack of awareness about the IFISA.

“I think the ISA pool of money is quite large but right now the awareness in the market for the innovative ISA is still low but we expect it to grow over the comings years,” he said.

The platform raises around £1m a month, with 60 per cent of that coming from ISAs. The average investment is about £7,000, Patel said.

A yet unpublished survey from the platform found that consumer demand for the IFISA is high, Patel said. About 17 per cent of people surveyed are looking for fixed income, 18 per cent want to know where their money is invested and 24 per cent are looking for tax efficiency, he said.

Crowdfunding platform Crowd2Fund has also seen increased interest. About 74 per cent of registrants have opened an IFISA on the platform in the last 6 months, said Sophie Changeur, digital marketing manager at Crowd2Fund. Around 20 per cent of IFISA customers are transfers from existing ISAs.

“We expect this to continue due to low interest rates, and the poor return offered by cash ISAs,” she said.


AltFi Amsterdam Summit 2018

AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.

5th November 2018

Companies in this Article:

Funding Circle

More like this:

Fellow Finance goes public

10th October 2018
George Geddes

Funding Circle’s slide continues

4th October 2018
Daniel Lanyon

P2P lender Folk2Folk surpasses £250m in loans

16th October 2018
George Geddes