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ISA Update – The Present Predicament

RateSetter are heavily involved in discussions between the Treasury and various leading platforms on the issue of ISAs – and have provided an update on the situation.

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With a government consultation in July fast approaching, the industry is trying to work out an answer to the complex question of how best to allow savers to shelter p2p investments within their ISAs. What’s been agreed so far is that p2p platforms will be allowed to act as ISA managers – offering their own product direct to lenders. What’s yet to be confirmed is the logistics of how this will work. There are three options currently swirling in the minds of policy makers – which you can read about here.

Rhydian Lewis, Founder and CEO of RateSetter, offered his take on the situation:

“Allowing P2P companies to become ISA managers is a key milestone in the development of the sector that will change the savings industry in the UK for the better.”

“The practicalities of how this innovation will work have still to be ironed out. The creation of a ‘Third ISA’ category would open up a whole new alternative to polarised cash or investment options for savers – providing that missing link between low yields and high risk.”

“But we believe that providing ISA savers with our own blended product is also a valid way to breathe new life into the ISA industry. As we are a technologically advanced sector, the hurdles this presents will not be insurmountable. However, the sooner the finer points are resolved, the sooner investors will be able to benefit.”

“The absolutely critical point is to not restrict savers’ options.”

One of the key issues is that p2p platforms require regulator permissions before they can become ISA managers. Such permissions will not be in place until autumn 2015. “Interim permissions” could serve as a method of speeding up the process, but would require platforms to have third-party backup administrators – a role for which custodian banks would appear to be well suited.

The advent of ISA inclusion is expected to increase the size of the p2p lending market from roughly £1.5 billion to £45 billion over the next 5 to 10 years - according to research from Liberum. We’ll continue to closely follow any developments within this ongoing dialogue. 

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