Zopa announces IFISA launch date, will retire Safeguard

By Ryan Weeks on 25th May 2017

P2P/Marketplace Lending

With full authorisation in hand, peer-to-peer lender Zopa looks to revamp product set.

Zopa announces IFISA launch date, will retire Safeguard

With full authorisation in hand, peer-to-peer lender Zopa looks to revamp product set.  

Zopa, the world’s original peer-to-peer lending platform, has announced a launch date for its Innovative Finance ISA. The product will go live from 15th June, offering returns of up to 6.1 per cent.

After an 18 month wait, Zopa received full authorisation from the FCA a few weeks ago, paving the way for its IFISA launch. Funding Circle, another of the UK’s “big three” peer-to-peer lenders, joined the ranks of the fully authorised yesterday. The final member RateSetter continues to operate under interim permissions.

In addition to unveiling its IFISA launch date, Zopa revealed that it would be folding its Access and Classic investment accounts into a new product: Zopa Core. This new account will provide exposure to Zopa’s A*-C risk markets, and will not be covered by the Safeguard fund. Its targeted net return will be 3.9 per cent, higher than both Classic (3.7 per cent) and Access (2.9 per cent).

Zopa is also moving to retire its Safeguard fund altogether. The Safeguard exists to provide an extra layer of coverage to investors against the risk of default. All loans that are currently covered in this way will continue to be, but no new loans will covered. The fund will be retired altogether on 1st December 2022, once all loans that are currently covered have reached maturity.

The Safeguard was introduced in 2013 to ensure that investors only paid tax on net interest income they received from Zopa borrowers. Zopa says that it is “strong health”, and that a change to the tax laws in 2015 – which enabled investors to claim for relief on losses from bad debts – is the primary reason for the fund’s retirement.

It is telling that Zopa is killing both its easy-access account and its Safeguard fund, as both structures have been identified as potential areas of concern in the FCA's ongoing review of crowdfunding regulations. 

The new IFISA product will be rolled out in four phases. At launch, it will be focused on existing customers who wish to open a new IFISA account using either the Plus or Core products. The second phase (1st July-31st July) will allow existing investors to transfer their loans into an IFISA wrapper. The third (from August) will allow existing customers to transfer ISA investments that are held with other providers into Zopa. The fourth and final phase will see the platform’s IFISA opened up to new customers.

“We’re proud of our 12-year track record of prudent lending and have always provided positive returns to our customers," said Andrew Lawson (pictured), Zopa’s chief product officer. "Safeguard was introduced in 2013 to deal with a tax anomaly that had led to peer-to-peer lenders being unfairly penalised. Since winning our campaign to change the tax rules, we no longer need Safeguard – as customers have proved by flocking to Zopa Plus. Now it’s done its job, retiring Safeguard, allows us to provide greater expected returns to our investors (because on average we over-fund Safeguard) whilst making the investor products even easier to understand. We’ll continue to maintain Safeguard for the rest of its life, and continue to build on our reputation for world-leading credit risk management.”

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