ifisa
Could an Innovative Finance ISA be the right option for your savings in 2017?

According to recently released figures from the Bank of England, savers are missing out on up to £21 billion of interest by using cash ISA deposits.

As at 31 October 2016, the value of all cash ISAs held in banks and building societies was £271 billion. The interest rate drop in October to 0.25 percent, now means that the highest return on easy access cash ISAs is around 1 percent, resulting in a cumulative annual yield of £2.71 billion.

Clearly, investors and savers are getting a rough deal. And to make it worse, with inflation being predicted to rise to 4 percent, deposited funds will actually be losing in value every day they are held in a cash ISA. Whilst they have historically been seen as a safe option, in current market and macroeconomic conditions it’s clear that savers will have to try something new to make the most of their money.

Enter the government’s new Innovative Finance ISA (IFISA).

Offering savers and investors a platform to mix up their traditional methods of saving, the IFISA incentivises measured, more balanced risk, allowing for tax efficient investing in peer-to-peer, and can generate returns of up to 8.7 percent. Research suggest that if the entire value of cash ISA deposits were moved to IFISAs, the annual return generated would be up to £23.5 billion.

 

The IFISA was introduced in the current tax year 2015/16, and like more traditional ISA products allows tax free investment of up to £15,240 in the current tax year.

Crowd2Fund, a directly regulated FCA peer-to-peer lending platform, is one of just a handful of platforms to have been given full approval, and have rolled out their IFISA. Within its first six months of operation the number of registrations on the platform increased by 500 percent, when compared with the six months prior to launch.

Three out of 10 IFISA investors on Crowd2Fund have transferred an existing ISA to the IFISA. Transferring is done by filling in a short form from IFISA providers and once this is completed, existing ISAs should be transferred by your old ISA provider in around 10 days.

It is possible to transfer ISAs from any number of years, as opposed to just historic ISAs from one provider or one financial year. There is no limit to the amount of or value (as little as £10) of cash ISAs which can be transferred.

Additionally, savers will also be likely to benefit from the compounding interest offered by the higher returns in the IFISA.

Chris Hancock, CEO of Crowd2Fund says: “Since the financial crisis savers and investors have been hit hard with low interest rates. The paltry returns offered by traditional cash ISAs make them hardly worth bothering with. In times of uncertainty, stoked further following Brexit and the US election result, investors should consider utilising an IFISA to protect and grow their net worth for the long term.”