More investors are turning away from high street savings accounts and cash ISAs to the Innovative Finance ISA (IFISA) for better returns, peer-to-peer lending platform Sourced Capital has found.
In the past three years since IFISAs have grown in popularity, the value of £1,000 on the high street according to the Consumer Price Index (CPI) would now have climbed to £1,067 today.
A traditional savings account would have returned just £1,008, while a fixed rate ISA is slightly better but still offers a loss compared to inflation at £1,037.
However, an IFISA would have returned £1,331, £264 higher than the loss due to the rate of inflation over that time.
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“It’s been a tough ask to get any form return on your savings in recent years and this has been largely down to interest rates remaining so low in an attempt to stimulate the economy through consumer spending,” said Stephen Moss, founder and managing director, Sourced Capital.
“Of course, the flip side to this is that inflation has remained fairly robust and has sat between 1.5 per cent and 2.6 per cent in all but two of the past eight years.
“As a result, not only has the return on our savings been minimal, but the increasing cost of living has pretty much wiped out any return available.
“It’s no surprise that as a result, alternative methods of investing have come to the forefront and the likes of the IFISA have grown in popularity with armchair investors and investment professionals alike.
“While there is, of course, an element of risk, investing in P2P products particularly in the property sector has seen consistently higher returns over the past few years, despite quieter market conditions due to Brexit uncertainty.”
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