The Innovative Finance ISA, which shields the returns from peer-to-peer loans from tax, appears to be gaining traction among investors.
Investors have stashed £290m in peer-to-peer loans within the Innovative Finance ISA (IFISA), according to official government figures.
The numbers, from HM Revenue & Customs (HMRC), are from the 2017-18 tax year. The average size of an IFISA is now £9,355, up from £7,200 in the previous year, suggesting investors are getting more comfortable in allocating their ISA allowance to P2P lending. The number of investors with IFISA subscriptions has also risen very rapidly to 31,000, up from 5,000, also suggesting its movement along the adoption curve is gaining momentum.
HMRC's number crunching shows that around £69bn was subscribed to ISAs, not including Junior ISAs, in 2017-18 tax year, an increase of £7.8bn compared to 2016-17. This increase is driven by the rise in stocks and shares ISA subscriptions with Cash ISAs continuing to fall in popularity.
At the end of 2017-18 the market value of Adult ISA holdings stood at £608bn. This represents a 4 per cent increase compared to the value at the end of 2016-17. This was driven by an increase in the market value of funds held in stocks and shares which increased by 7 per cent compared to the year before.
Cash ISA holdings account for 44 per cent of the market value of ISA funds and stocks & shares ISAs account for 55 per cent of the market value.
While the IFISA market is still a small fraction of the total ISA market, the growth is clearly rapid. In the same period of the previous tax year just £36m made it into the IFSA, a growth rate of eight times the 2016/17 figure.
The number of IFISAs opened in 2017-18 grew to 31,000 up from just 5,000 account openings in the 2016-17 tax year.
Natasha Wear, Head of Investment Products at Zopa, said: “These figures are further evidence of that fact that people want a reliable alternative to lower return cash savings products or the volatility associated with investing on the stock market.”
Zopa, the largest UK consumer P2P lender, has since the launch of its IFISA products in June 2017 seen £150m flow into its ISA to date.
Now in its sixth year, the AltFi London Summit returns on 18th March 2019 to 155 Bishopsgate. Last year proved to be a crucial turning point for the key players building the future of finance. Leading platforms launched oversubscribed IPOs, digital banks proliferated and mainstream financial institutions started their own disruptive propositions. With 2019 certain to be another landmark year, more questions will be asked by regulators with investor interest in disruption also poised for more rapid growth.