Ultimate guide to Innovative Finance ISAs: Part one
WITH ISA season upon us, investors this year have a far greater variety of products to choose from.
Peer-to-peer lenders have been busy launching their Innovative Finance ISA (IFISA) propositions, enabling investors to get inflation-busting returns in a tax-free wrapper.
There are more than 30 IFISAs currently in the market, which means choosing one to invest in can be a challenge.
IFISAs enable people to invest in consumer loans, business loans, property loans or other niche areas like green energy.
In this article, we’ll take a look at the consumer loan propositions.
Lending Works’ IFISA, launched in February 2017, advertises an annual return of six per cent for five-year loans or 4.5 per cent for three-year loans. It is possible to split money across the two rates.
Investors can choose to draw an income or have the repayments automatically re-lent out.
The minimum investment is £10.
Zopa, which reopened to new investors last month, advertises a rate of four per cent a year in ISA Core, or 4.6 per cent a year in the higher-risk ISA Plus.
It is a flexible ISA, which means money can be withdrawn and then replaced in the same tax year.
The minimum investment is £1,000.
RateSetter launched its IFISA to existing customers earlier this month. It plans to extend it to new customers in March once all existing investors have been invited.
RateSetter’s portfolio has a 70 per cent weighting to consumer loans, but it also provides business loans, which make up 13 per cent of the portfolio, and loans for property development, which make up 12 per cent of the portfolio.
At the time of writing, investors can earn up to 5.1 per cent a year, depending on the duration of the investment chosen.
The minimum investment for this flexible ISA is £10.
Look out for our upcoming coverage of business- and property-focused IFISAs.