IFISA Extends to Include 'Debt Securities'

The list of qualifying investments for the Innovative Finance ISA has been extended.

Back in July, Chancellor, George Osborne revealed that peer-to-peer loans were to be eligible for investment through a newly formed ISA as of April 6^th 2016. But thoughts on whether to include “debt securities” such as bonds, mini-bonds and then also equity crowdfunding were put off to a consultation later in the year.

Earlier this week, it was announced in the Autumn Statement that bonds are to also be included. However, mini-bonds are not to be included, as they are non-transferrable.

Also, equity investments are not to be incorporated in the IFISA just yet but this is not the end of the road for crowdfunding as the government has confirmed that it will “continue to explore the case”.

The likes of UK Bond Network, Wellesley & Co and Abundance are poised to take advantage of the IFISA extension.

Christopher Maule, CEO, of UK Bond Network commented:

“We’re incredibly pleased that the Chancellor has broadened the remit of the Innovative Finance ISA to include debt securities. Individuals investing through the UK Bond Network platform are supporting British MSBs – a group the Chancellor has recognised as crucial to the health of the UK economy. It is only right that investors in this type of debt should benefit from the same tax efficiencies as those in other asset classes.

“Following the relaxation of terms in last years’ Budget, we made all investments through our platform SIPPable, a move which proved popular with investors wishing to protect their returns from income tax. We expect the new IFISA to be met with similar enthusiasm by the investor community, as the new product will enable them to access higher yields while saving for the future.”

In the wake of the announcement, Assetz Capital revealed that it is to launch an Innovative Finance ISA account. Stuart Law, CEO of Assetz, explained:

“The decision to include peer-to-peer loans in the new Innovative Finance ISA and block, for the time being, the inclusion of peer to peer equity investment opportunities is a sensible decision to protect both investors and the ISA brand quality. Peer to Peer lending has proven to be relatively capital secure since its inception where overall returns across the industry have been positive and healthy every year to date.”

Law went on to say that Assetz felt it was the correct decision to exclude equity investments from the third ISA:

“The same cannot necessarily be said for more volatile Stocks and Share ISAs with regular annual losses and also cash ISAs with low levels of interest. Furthermore many Peer to Peer equity investments are in startups that have a high incidence of failure and it was right in our view to exclude them for now and protect the ISA brand.”

It is expected that all peer-to-peer platforms will try to become ISA managers when the new ISA is launched but some platforms, such as RateSetter and Lending Works have already suggested this on their platforms.

A recent study by peer-to-peer lender Thincats shows that the new IFISA could attract a large number of everyday investors over to P2P. The research shows that 40% could make the switch to investing through peer-to-peer lending platforms.

One aspect to make a note of from this week’s statement was that there was no mention of the April 6^th date and as my colleague Ryan Weeks said in his Autumn Statement round up – it might not be worth panicking over just yet, but it’s definitely worth being aware of.