Innovative Finance ISA (IFISA) inflows have continued to rise since hitting the £1bn milestone last year, suggesting the industry has shaken off reputational issues following high-profile platform collapses.
Fresh data compiled by The Investing and Saving Alliance shows the total amount invested in the IFISA tax wrapper reached £1.14bn by February 2020, with still a few months to go before the tax year ends.
This is up from £711m in the 2018/2019 tax year. The figures show there are 78,714 IFISA accounts with an average of £14,503 invested in each one. These figures are based on around a quarter of ISA managers, and so could be much more.
Funding Circle has said more than £400m has been invested through its IFISA, while RateSetter has reported inflows of £280m and Assetz Capital has £103m. Zopa has said it does not disclose its IFISA inflows. Continued growth in IFISA inflows is good news for a sector that has been hit by the collapse of Lendy and Funding Secure over the past tax year, as well as tougher regulations.
The City watchdog had also issued a warning about “high risk” IFISAs following the collapse of mini-bond provider London Capital & Finance last year.
“The collapse of Lendy and London Capital & Finance shows the value of regulation in ensuring companies have appropriate systems and controls to make sure the interests of their small investors are paramount,” Bruce Davis, co-founder of crowd bonds platform Abundance, one of the first IFISA providers, said.
“We need to be clear that both companies set up their businesses outside of regulation and whether through intention or incompetence created structures which it transpires were financially unsustainable.
“Their actions and approach do not reflect the practices and standards of the regulated industry who work hard to make sure that investors are offered products that are appropriate for retail investors and that customers understand the risks of their choices.”
The IFISA wrapper had a slow start in the 2016/2017 tax year, attracting just £36m of subscriptions across 5,000 accounts. This increased to £290m across 31,000 accounts in the 2017/2018 tax year. HMRC has not yet released figures for the 2018/2019 tax year, despite usually releasing figures for the previous period each August.
An HMRC spokesperson said the next update – showing figures for 2018/2019 – would be made public in April 2020. Platforms may then have to wait for another year to see how the 2019/2020 tax year intake compares.