From 6 April, investors will have the option to put money into new ‘innovative finance’ Isas.
These accounts will give you the option to invest using a peer-to-peer (P2P) lending company – through which your cash is lent out to individual borrowers or small businesses – in a tax-free Isa wrapper for the first time.
In theory, P2P lending offers the opportunity for more generous returns than you can get from interest on cash savings, but with less volatility than you would get from the stock market.
For example, Zopa – one of the first and largest P2P lending platforms – is projecting returns of up to 7.2% after fees and bad debt.
However, regulatory delays mean that your choice of providers is likely to initially be very limited.
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Innovative finance Isas were announced in Chancellor George Osborne’s 2015 Summer Budget. But at the time of going to press, no major P2P platforms had been given the necessary regulatory authorisation from the Financial Conduct Authority (FCA) to offer the new accounts.
Two of the industry’s smaller platforms, Abundance (an ethical investments outfit) and Crowdstacker (which offers P2P investment in businesses), claim to already have all the necessary permissions. But other major providers, such as Funding Circle, Ratesetter and Zopa told us they were still waiting.
If you’re interested in investing via an innovative finance Isa, it will be worth waiting until a range of providers are able to offer them, especially as you are only able to invest in one each year.
FCA working hard to meet 6 April deadline
The FCA said: ‘We have received a very high number of applications from P2P companies which, coupled with recent regulatory changes, has created particular pressures on our authorisation process. We have already authorised a number of firms, and are working hard to get as many firms as we can that meet our standards authorised by 6 April.’
The delay is down to the authorisations process that any provider wishing to offer the new Isas has to go through with the FCA. P2P industry sources say that although the regulator is working hard to process applications, its resources are overstretched.
Adding to the situation’s complexity is the likelihood that savers will be unable to simply transfer existing P2P investments into an Isa ‘wrapper’ when their provider becomes authorised.
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