Savers And Investors Set To Make 2019 The Year Of The IFISA


 This year is set to be the year of the Individual Savings Account (ISA). More specifically, it's going to be a bonanza for savers and investors who commit money to Innovative Finance ISAs (aka IFISAs).Of course, that's just our opinion; we would say that, wouldn't we? But it's an opinion based on compelling evidence. Here are some salient facts.

First off, there's a lot of money and people in the ISA market generally. HMRC statistics show that 10.8 million adults subscribed for ISAs in 2017/18 against 11.1 million in 2016/17 and 12.7 million in 2015/16.Second, many savers are realising that Cash ISAs are less attractive in yield terms than some alternatives (such as IFISAs). The number of Cash ISAs sold in 2017/18 declined by 697,000, but 246,000 more Stocks & Shares ISAs were sold. Despite the decline in the number of Cash ISAs sold during 2017/18, 72 per cent of subscriptions were made to Cash ISAs. This figure was 77 per cent in 2016/17.A total of £69 billion was subscribed to ISA accounts in 2017/18, a rise of £7 billion on the previous year.The average subscription to an ISA was £6,409, an increase of 15 per cent.

As at 5 April 2018, the value of all adult ISAs was £608 billion, a rise of 4 per cent on 2016/17. Cash ISAs represented 44 per cent of the total, a fall of 2 per cent on the previous year.Third, the IFISA, while still a small proportion of the overall ISA market, is growing rapidly. More than 31,000 IFISAs were sold in 2017/18 against 5,000 the previous year. £290 million was invested in IFISAs against £36 million the previous year. The average amount invested in an IFISA was £9,355 in 2017/18, which is way above the average for all ISAs (£6,409 is the overall average). It's clear that some savers are recognising the yield pick-up that is available.The fall in the number of Cash ISAs opened reflects the continuing low level of interest rates. Money&Co. did a survey of all Cash ISAs offered last year and the average rate being offered for 2017/18 was 1.03 per cent, with the large banks only offering 0.5 per cent. The fact that older investors are at the forefront of the struggle to find income-producing investments.Some £267.5 billion remains invested in Cash ISAs and while we expect to see a significant increase in new IFISA investment, the peer-to-peer (P2P) industry will continue to focus all year long on persuading Cash ISA holders to transfer to an IFISA. Money&Co.'s IFISA has produced returns of over 7 per cent, net of charges and free of all taxes for our lenders.

A Process Guide To Innovative Finance ISA Investment

All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (ISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.So here's our guide to the process:
  • Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
  • Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
  • Step 3: Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you've bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.
The ISA allowance for 2018/19 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We're assuming a 7 per cent return, net of charges and free of tax here.Once you have made your initial commitment, you might then consider diversifying - buying a spread of loans. To do this, you can go into the "loans for sale" market. All loans bought in this market also qualify for IFISA tax benefits.

Risk: Security, Access, Yield

Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here's one of several earlier articles on security, access and yield.

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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.