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Peer2Peer Finance News | August 17, 2019

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2,000 IFISAs subscribed last year as consumers eschew low-yielding cash ISAs

2,000 IFISAs subscribed last year as consumers eschew low-yielding cash ISAs
Suzie Neuwirth

TWO THOUSAND Innovative Finance ISA (IFISA) accounts were subscribed in the last tax year, with retail investors collectively putting £17m in to the tax-free wrapper, official figures show.

ISA statistics released on Thursday by HMRC include IFISA data for the first time for the 2016-2017 tax year. The IFISA was first mooted by then-Chancellor George Osborne in July 2015, as a tax-free wrapper around alternative investments including P2P lending, and was officially launched in April 2016.

The average amount of money invested through an IFISA was £8,500 – slightly less than the average £8,623 put in to a stocks and shares ISA but almost double the £4,622 put in to a cash ISA.

Cash ISAs dwindled in popularity last year, at a time of historically low interest rates on savings accounts. 8,480 cash ISA accounts were subscribed, down from 10,118 the previous year, while the average amount of money fell from £5,801 to £4,622.

Read more: P2P firms alert HMRC to IFISA issues

These statistics corroborate figures previously reported by Peer2Peer Finance News that show around one third of money placed into IFISAs on individual peer-to-peer lending platforms last year was from transfers rather than new money.

Firms including Landbay and Lending Works suggested that savers are ditching low-paying cash ISAs for the higher returns yielded from an IFISA.

“It looks like the IFISA has taken a small bite out of the cash ISA pie which is a positive movement,” said Lex Deak, chief executive of investment aggregator OFF3R.

“However, the typical size being comparable to the investment [stocks and shares] ISA suggests it is still very much the preserve of the more seasoned investor. It’s good to see some uptake but clearly there is a long way to go before it is considered a mainstream product.”

Read more: IFISA uptake surpasses expectations

While IFISA uptake has risen sharply over the last year, the amount invested is still dwarfed by both other types of ISAs. While £17m was invested in IFISAs, £22,325m was invested in stocks and shares ISAs and £39,191m was invested in cash ISAs.

“Uptake of the IFISA is obviously quite low as it’s very new,” said Carol Knight, chief operations officer at financial services trade body Tisa.

“There’s a very small number of accounts but it shows there’s an appetite for something different in a period of low interest rates.”

A Treasury spokesperson said: “ISAs are one of the many ways in which we are supporting savers, and over 21 million adults already have one. The new Innovative Finance ISA offers savers more choice over how they invest their money.

“68 firms have now been authorised as ISA managers, including some of the UK’s leading innovative financial services firms, so we expect more people to benefit from this account over the coming year.”