The launch of a new consultation into the structure of the peer-to-peer ISA was announced today. P2P loans will reportedly be permitted within the tax efficient wrapper within 6 to 12 months. Currently, you can invest £15,000 a year in either a savings or stocks and shares ISA. The returns on offer in peer-to-peer lending can be as high as 5-15% – far higher than the 2% that is available in a typical savings ISA. But according to new research from property-backed peer-to-peer platform Proplend, 85% of the public are unaware of the enhanced investment potential of peer-to-peer lending through an ISA.
“Just imagine, if 85 per cent of the people who put £40 billion into cash ISAs in 2012-13, switched to the P2P route it would generate £34 billion of precious funding for business. This would be a wall of retail money that looks and acts like institutional money.”
“Individuals in the current long term low interest rate situation can look to P2P lending as a means to generate much-needed income from cash reserves and balances. £1 billion has already been lent via P2P platforms this year.”
The peer-to-peer ISA will play its own part in lowering the 85% figure. This morning’s government consultation announcement has already garnered a mass of media attention. The other point that Mr Bartaby alludes to – one which is sometimes overlooked in the P2P ISA discussion – is that the effects of the tax wrapper’s expansion will be every bit as positive for credit-starved individuals and SMEs as it will be for investors.