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.
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.
“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A yet unpublished survey from the platform found that consumer demand for the IFISA is high, Patel said.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.