ISA investors will need a minimum rate of return of 1.84 per cent to beat inflation this ISA season, Assetz Capital has found.
The peer-to-peer business lender’s indicative ISA calculator projected how much tax investors can save when investing their ISA allowance and whether their ISAs’ target returns are beating the current inflation rate of 1.8 per cent.
The calculator shows that taxpayers who invest the maximum yearly ISA allowance of £20,000 at a rate of 1.84 per cent will receive an effective annual interest rate of 0.01 per cent when adjusted for inflation.
This yields a projected annual growth of just £1.38 in real terms.
The average rate of return for a traditional one-year fixed rate ISA is currently 1.12 per cent, according to Moneyfacts.
This equates to an effective annual interest rate of minus 0.7 per cent, representing a £140.03 annual loss for investors when inflation is factored in.
“Investors that are looking to grow their money this ISA season will find little value in the traditional ISA market,” said Stuart Law, chief executive of Assetz Capital.
“With many conventional ISA products effectively causing people to lose money when inflation is factored in, investors may have to look elsewhere to receive a decent return.
“Assetz Capital was founded to give people fairer returns on their hard-earned cash.
“Our investors have invested over £100m in our IFISA to date, earning over £7,000,000 in tax-free interest in the process.
“The banks are unlikely to increase their rates in the near future, so we expect investments in our IFISA to increase as more people eschew traditional ISA products and join our growing community of 38,000 investors.”
Assetz Capital’s quick access account, which can be wrapped in its Innovative Finance ISA (IFISA), is currently offering a target interest rate of 4.1 per cent.
According to the calculator, taxpayers who invest their ISA allowance into this account could receive an effective annual rate of 2.23 per cent after inflation, which would produce an annual growth of £445.24 in real terms.