ZOPA has deemed the Innovative Finance ISA (IFISA) “the perfect middle ground”, after its research found that stock market volatility is dissuading UK consumers from investing.
The peer-to-peer consumer lender, which is readying to launch a digital bank, surveyed 2,000 adults and found that 67 per cent are concerned about fluctuations in the stock market, while 55 per cent said they would be unlikely to consider a stocks and shares ISA in 2019.
However, they are not fleeing to cash or bonds, the traditional safe havens during challenging market conditions. Zopa’s research found that people are actually putting the brakes on saving, with less than one in three expecting to save more this year than last year.
Part of the reason for this is the decade of poor returns savers have seen from cash on deposit. The latest official figures on adult ISA sales show cash ISAs had a tough year, with 697,000 fewer accounts opened in the last tax year.
For those who are expecting to save less, the main hurdles they face are higher cost of living, Brexit uncertainty, high inflation and low returns on their savings, Zopa found.
“2019 is going to be yet another challenging year for savers and investors,” said Andrew Lawson (pictured), Zopa’s chief product officer. “Our research shows that people continue to be disappointed by traditional financial products like the cash ISA or investing via the stock market.
“The IFISA stands as the perfect middle ground, offering a great alternative for people who want higher returns than cash ISAs, but not the volatility of stocks and shares.
Read more: IFISAs: Plenty to play for
“P2P lending can be incredibly effective way to diversify an investment portfolio. People looking to invest need to know what assets they are investing and the related risks – personal loans in particular are reasonably stable and predictable.”