P2P – Innovative Finance ISA (IFISA) Aims 4% Revenue

Octopus has become the most recent provider to offer an Innovative Finance ISA (IFISA) and it is aiming for a four per cent return per year for investors, though this is not guaranteed.

The lowest investment level in the peer-to-peer lender is £10 tax-exempt, up to the yearly ISA allowance, presently £20,000 for the 2017/18 tax year. There are no upfront fees or recurring charges.

The cash is invested in loans protected against property in the UK by means of its lending arm, Octopus Property. Since its inauguration in 2009, Octopus Property has lent out more than £2.6 billion and claims a default rate of below 0.1%.

Sam Handfield-Jones, Octopus Choice’s head, said that he believed during a period of low-interest rates, soaring inflation, and continuous stock market imbalance, an alternative tax-efficient investment solution has never been more crucial or significant to investors.

Innovative Finance ISA

This type of ISA was launched in April 2016. It allows individuals who put resources into peer-to-peer loans to save within a tax wrapper, which means they acquire tax-exempt revenues. Peer-to-peer lending links savers directly with borrowers, eliminating the middleman (the banks).

Interest rates on offer have a tendency to be higher than you would acquire on a traditional cash ISA but the dangers are greater and there is no Financial Services Compensation Scheme (FSCS) protection if something turns out badly.

Although ISA has been around for over a year, only peer-to-peer lending platforms with full ISA manager authorisation from the Financial Conduct Authority (FCA) are able to offer the IFISA.

Up to now, these are the more recognisable peer-to-peer providers that have full IFISA authorisation:

  • Abundance
  • Crowdstacker
  • Folk 2 folk
  • Kuflink
  • Landbay
  • Lending works
  • Zopa

Ratesetter, one of the standard players in the peer-to-peer market, disclosed information of its IFISA a year ago yet it affirmed it is still awaiting full authorisation from the FCA.

While peer-to-peer lender ThinCats recently confirmed it has received full approval from the FCA.

Watch this space as more firms will also apply for IFISA.