A new dawn for Innovative Finance ISAs

Written by Lisa Stanley Mann on 30th March 2016

Innovative Finance ISAs will be available next week. But how many providers will actually have an authorised IFISAs available for investment?

Environmental peer to peer platform Abundance claims to be one of the first providers to launch an Innovative Finance ISA on 6 April.

The Abundance ISA will initially pay a 2 per cent annual return on money invested between April 6 and October, when the new IFISA rules will permit Abundance debentures’ inclusion within the wrapper. From October customers will be able to choose from a range of renewable energy projects available on the platform paying an effective rate of return of between 6 and 9 per cent, depending on the project chosen. Returns within the ISA wrapper will be tax-free.

Meanwhile, business P2P site, Crowdstacker, has also announced its launch plans, which will enable investors to earn tax-free interest on any of the investments featured on its platform. This currently includes loans to businesses via its Amicus investment option, which offers 4.32 per cent over a 12 month term, or 6.39 per cent over a three year term. Or residential property-based loans via its Quanta option.

 

 

Regulatory authority, the FCA, says, ‘This is a young and innovative market and we expect the Innovative Finance ISA to further increase consumers’ awareness of peer-to-peer lending (P2P). The FCA is keen to promote effective competition in this market.

‘We have received a lot of applications for firms wanting permission to operate a P2P platform.  Our consideration of whether to authorise firms as P2P platform operators is against a backdrop of recent changes to legislation which clarify how operating a P2P platform fits with other regulated activities. These changes came into effect in January and mid-March 2016.

As at 30 March 2016, eight firms have been fully authorised to operate P2P platforms. There are a further 86 firms awaiting a decision, of which 44 have interim permission. Only P2P loans on platforms operated by firms with full authorisation will be eligible investments for the Innovative Finance ISA.’

Bruce Davis, cofounder and joint MD of Abundance says, ‘The Innovative Finance ISA is an exciting product, offering ISA buyers a much-needed risk/return middle ground between the very low returns paid by Cash ISAs and the wild volatility of global markets offered in Stocks and Shares ISAs. More than this, our Abundance product is the ‘Nicer ISA’, offering unique ‘win win’ investments that pay attractive returns every six months at relatively low risk, while creating something good for the environment and society.”

We’re expecting other providers, such as Ratesetter and Zopa, to announce further launches soon – read more here in our earlier blog.

Want to know more about responsible options for where to put your ISA this year? You can read our investigation here too.