It’s all hotting up in the peer-to-peer (P2P) and Innovative Finance ISA (IFISA) market.
This week, not one, but two more providers have confirmed their launch plans.
IFISAs will be available from 6 April, 2016. This new investment wrapper, granting tax-free status to peer-to-peer loans and some debt-based crowdfunds, should mean that more ISA money moves away from the more established high street bank or equity fund manager platforms, across to newer ‘good’ options, such as the renewable energy platform Abundance Investment and personal lending P2P platforms such as Zopa and Ratesetter.
The current total ISA annual limit is £15,240. Typical returns on the new IFISAs should come in at anything between 4 and 8 per cent, with varying degrees of risk, so there is little compromise on the typical return derived from a Stocks and Shares ISA, and much better than cash. We like.
Bruce Davies, cofounder and MD of Abundance, the UK’s fourth largest P2P platform, first FCA-regulated platform, said: “The Innovative Finance ISA is a refreshing new opportunity for British savers and investors looking for higher returns than cash ISAs but less volatility and risk than equities. The Abundance IFISA will pay investors an effective rate of return of between 6 and 9% depending upon which projects they choose, and through the new ISA status, these twice yearly cash payments will be tax-free.
“The other big advantage of the Abundance IFISA is that although it is designed to offer strong steady returns over the long term (typically 20 years), your holdings can be traded to others at any time on the website, free of any additional charge.”
Meanwhile, Zopa, the P2P pioneer that launched in 2005, has announced plans to rejig its lending product range in mid-March, ahead of the impending IFISA launch.
The new products will replace the existing lending offering with three new options: Zopa Access, Zopa Classic and Zopa Plus. Together, Zopa says, these products will offer more choice and flexibility to new and existing Zopa lenders. Specific rates for each product will be announced on 1st March. All three products will be ISA eligible, subject to regulatory approval.
Finally, Ratesetter was first to announce its plans back on 8 February, although like Zopa’s, its IFISA launch is subject to regulatory approval. RateSetter will offer four products, each with a differing loan term ranging from one month to five years. RateSetter investors can either accept the interest rate set in the markets, or choose to set their own rate.
IFISA investments will not be covered by the Financial Services Compensation Scheme.