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Peer2Peer Finance News | October 23, 2018

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Only 5pc of investors understand the IFISA

Only 5pc of investors understand the IFISA
Suzie Neuwirth

JUST ONE per cent of active investors plan to invest in an Innovative Finance ISA (IFISA) this tax year and only five per cent fully understand what the product is, research from Crowdstacker has found.

The peer-to-peer business lender surveyed more than 2,000 active investors in February 2017 about their investment intentions and their understanding of the different types of ISAs on offer.

Five per cent of respondents said they knew a lot about the IFISA and would feel comfortable explaining it to someone else, while a further 16 per cent said they knew something about the product but not enough to explain it to someone else.

29 per cent said they’d heard of the tax wrapper but did not know anything about it, while 50 per cent said they’d never heard of it.

Investor awareness of other aspects of the ISA market was also low. Just 23 per cent felt fully knowledgeable about the current ISA limit and only eight per cent said they knew a lot about the ability to transfer investments between ISA products.

20 per cent said they’d feel comfortable explaining how money is taxed on an ISA to someone else, 11 per cent fully understood the tax differences between an ISA and a pension and just nine per cent knew a lot about flexible ISAs.

Read more: Checkmate over IFISA data

When it came to their investment intentions, a cash ISA was the most popular choice (26 per cent), despite the extremely low returns on offer. This was followed by a workplace pension (14 per cent) and a personal pension (six per cent).

One per cent of respondents said they were planning to invest in an IFISA, while a further two per cent said they planned to put their money into a P2P lending platform.

Crowdstacker, which recently launched its very first bond as part of its expansion plans, said that IFISA investment on its own platform had remained very steady from the last tax year at around £1m per month.

Read more: IFISAs: The golden ticket

The firm, which was one of the first P2P lenders to launch the IFISA, said the average amount invested had also stayed the same from the start of the year at around £6,000 per investor.

“More and more providers are introducing their IFISA offering which is great to see, and we hope that awareness for the product will in turn grow,” said Karteek Patel, chief executive of Crowdstacker.

“Since we launched our own ISA at the start of the 2016-17 tax year we have seen a steady inflow of an average of £1m a month into our IFISA.

“This comes from a range of investors, of all ages, all looking for fixed income and control of where their money is going. In the current economic and political climate, we will no doubt see more investors being attracted to helping British businesses grow and taking control of their investments.”