The Innovative Finance ISA (IFISA) looks set to become a billion-pound product, exclusive data reveals.
Figures provided to Peer2Peer Finance News from the Tax Incentivised Savings Association (Tisa) show the tax wrapper has been growing in popularity since a slow start in its first tax year of 2016/2017 and as of May had attracted £764m since April 2016.
There was £52.7m of inflows reported at the start of the current tax year alone. The billion-pound boost will be welcome news at a time that the industry has faced negative press and regulatory scrutiny.
The collapse of property P2P platform Lendy has led some to question the safety of the sector, while the Financial Conduct Authority announced last month that it was pressing ahead with marketing restrictions and appropriateness tests, to be introduced from December.
Tisa’s data is based on 90 per cent of the IFISA market and includes figures reported on a monthly basis by big names such as Zopa, Assetz Capital and RateSetter.
Funding Circle is not included in the statistics but industry sources feel confident that its IFISA intake will bring the overall figure around the £1bn mark.
The publicly-listed business lending platform – which launched its tax wrapper in November 2017 – reported £120m of inflows in its IFISA last August and is expected to reveal its updated IFISA statistics in July 2019.
“Tisa has now been collecting the IFISA statistics for more than 12 months and this data shows the continuing acceptance of the IFISA amongst retail investors,” said Jake Wombwell-Povey, founder of direct lending investment manager Goji, who has been working with Tisa on the data-set.
“Although Funding Circle has not reported its figures, the data shows that more than 57,000 IFISA investors are holding in excess of three quarters of a billion pounds in IFISAs, so the tax wrapper’s success is now undeniable.” Funding Circle declined to comment.
The data shows that as of May 2019, there were 57,144 IFISA accounts, with an average of £13,367, a figure that has been increasing in recent months.
Mario Lupori, chief investments officer at RateSetter, said the positive figures would inject more confidence into the sector. “It’s important now as headlines for P2P recently have been unhelpful and misguided,” he said.
“It shows this is a product that investors enjoy and are getting good value from. “This is a good round number and says the product is here to stay and will get bigger. “It is a compelling number that commentators and professionals in the sector can latch onto.” He said RateSetter has attracted £250m into its IFISA since launch in February 2018, and believes it is the biggest IFISA manager.
Read more: Five ways to add IFISA diversity
“Our average IFISA balance is £11,500, which is bigger than both cash and stocks and shares. “This gives an idea of the type of investor the IFISA is attracting.”
Bruce Davis, co-founder of ethical crowd bonds platform Abundance, which was one of the biggest recipients of IFISA money in the first year, said the lender has attracted £33m across 3,100 accounts. He said the £1bn figure helped “prove the concept” of the tax wrapper.
The industry data is a vast improvement on official figures for the IFISA. The latest HMRC IFISA data, for the 2017/2018 tax year, said that £290m was invested into 31,000 IFISA accounts, up from £36m across 5,000 accounts the previous year.
However, Mike Bristow, chief executive of P2P property lender CrowdProperty, said while the tax wrapper was a sign of strength, it shouldn’t distract from the importance of a well-managed platform.
“P2P lending with a trusted, reputed and best practice platform with expertise and track record is a game changer for lender returns,” he said.
“These platforms reliably and more efficiently match the supply and demand of capital, meaning a better deal for lenders and borrowers rather than value leakage covering inefficient fixed costs.
“The IFISA tax shield then is a valuable cherry on top, giving lenders further benefit of those higher returns.”
This article featured in the July edition of Peer2Peer Finance News.