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Peer2Peer Finance News | December 14, 2018

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P2P investors abandon cash ISAs

P2P investors abandon cash ISAs
Kathryn Gaw

INVESTORS are ditching their cash ISAs in favour of other forms of ISA accounts, according to new research from peer-to-peer platform Assetz Capital.

In the first quarter of this year, 52 per cent of Assetz Capital’s investors had put money into cash ISAs, but this figure had dropped to 37 per cent by the end of the second quarter of the year.

By contrast, 61 per cent of the platform’s users were invested in a stocks and shares ISA, and 60 per cent held an Innovative Finance ISA (IFISA).

Assetz Capital’s chief executive Stuart Law said that investors were being driven away from cash ISAs due to the historically low interest rates and the rising credibility of alternative options such as P2P lending.

Read more: Assetz reports £10m of inflows since rate rise

“Given our investors are familiar with P2P lending we’d expect to see more opt for an IFISA than the general public, but it is still notable to see this significant drop in cash ISA users,” said Stuart Law (pictured), chief executive of Assetz Capital. “Our IFISA has grown steadily in popularity since launch. As of the end of May, almost £50m has been invested in our ISAs – over £12.5m of which has come from transfers.

“Around 75 per cent of all investment in our ISA is new money on the platform and the average size of an ISA account is approaching £15,000, which is a lot higher than the industry average of £4,400.

Read more: Only six per cent of Brits aware of Innovative Finance ISAs

“We believe much of this is driven by a movement away from cash ISAs and we expect this to continue as consumers look to make their money work harder for them. We also put this down to the secured nature of our P2P loans and our credible levels of net returns when compared to many of our competitors, according to AltFi Data market analysis, as well as our long track record in the industry.”

According to Defaqto statistics, in March 2018 the average interest rate offered by a cash ISA was just 0.7 per cent, while inflation was at 2.4 per cent in April.

Read more: Could savers be given access to multiple IFISAs each tax year?