By Roger Baird on Tuesday 3 September 2019
Retail investors are warming to this new investment product, according to new data.
The value of cash wrapped up in innovative finance individual savings accounts has ‘nearly doubled’ as investors have become used to the new product over the last year.
Small investors have parked £588m across 40,400 accounts by the end of the second quarter of this year, according to trade body the Peer-to-Peer Finance Association (P2PFA).
The compares with around £300m invested in this product 12 months ago across major platforms such as Funding Circle, Ratesetter, Zopa, said the trade body.
P2PFA chair Paul Smee said: “The innovative finance individual savings accounts has been a major landmark in the development of the UK alternative finance landscape. All member platforms have launched their own offerings for retail investors giving consumers the opportunity to access tax-free interest on peer-to-peer investments.”
‘Steady growth’
The P2PFA's membership is made up of eight platforms and eight associates, which it says accounts for two-thirds of the industry by volume. However, Ratesetter, one of the big three firms in the industry and the largest platform outside the trade body, adds it currently has £265m of subscriptions to its innovative finance individual savings accounts.
The then Chancellor George Osborne first announced innovative finance ISAs in 2015, which went on sale to the public a year later.
Customers can save up to £20,000 in this current tax year across several different types of ISAs. This can be a cash ISA, a shares ISA, an innovative finance ISA, a Help to Buy ISA, a Lifetime ISA or a mixture of all of them.
An innovative finance ISA is a riskier investment in anything from peer-to-peer lending to consumers, businesses, property and crowdfunding. As with other types of ISA, any interest you get from this type of product is not taxed. Although, the fact that you are lending money means there's a chance the borrower will not repay the debt.
New quarterly data
However, P2PFA director Robert Pettigrew said: “During the first fifteen months of the innovative finance individual savings account, six member platforms launched their offerings and more than £300m was invested. Twelve months on, all member platforms now offer an innovative finance individual savings account to investors - levels of investment have nearly doubled with steady growth in the number of innovative finance individual savings accounts.”
The trade body also added that it will now publish quarterly figures on assets under management held in innovative finance individual savings accounts as well as the number of accounts held, to bring greater clarity to this new market for investors.
Currently, several bodies collect innovative finance individual savings account data, including the Tax Incentivised Savings Association and HMRC.
HMRC data shows that after a slow start in the 2016/17 tax year, just 5,000 customers opened innovative finance individual savings accounts with a total of £36m subscriptions. However, in the following 2017/18 tax year, this jumped to 31,000 customers investing £290m in the product.
21 March 2023
Daniel Lanyon