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IFISA awareness still low


The new Innovative Finance ISA (IFISA) ticks the top three investment priorities but awareness of it remains low, according to research amongst UK investors.

The research, which was carried out to mark the close on 5 April 2017 of the first full tax year since the IFISA launch, explored investors’ intentions for the year ahead. 
It found that fixed income (17 per cent), the opportunity to self-select how and where their money is invested (18 per cent) and tax efficiency (24 per cent) were top of their list of investment priorities.
The IFISA aims to meet all these needs but despite this half of those investors questioned said they had never heard of it, and a further third (29 per cent) do know the name but don’t know what it is. In fact, only one in 20 (5 per cent) said they know enough about what an IFISA is to be able to explain it clearly to other people.
The IFISA offers investors the chance to put peer to peer (P2P) lending in a tax efficient wrapper, paying around 6 per cent. About 4 per cent of all potential ISA money is earmarked for investment in IFISAs over the 2017-18 tax year, according to the data released by Crowdstacker.
Several platforms are able to offer the IFISA, two of which have done so for the entirety of the 2016-17 tax year (Crowd2Fund and Crowdstacker). But currently none of the largest three platforms, Zopa, Funding Circle and Ratesetter, are licensed to offer it.
Unlike a standard ISA, the IFISA is not covered by the Financial Services Compensation Scheme.
“We believe our own success in year one of offering the Innovative Finance ISA – we take an average GBP1m per month in ISA investment – is clearly just the tip of the iceberg. We can see from this new data there is an appetite for it, and that investors want all the things it can offer such as better returns, tax efficiency, transparency, and fixed income,” says Karteek Patel, CEO of Crowdstacker.
“But what our research also shows is that not enough people have heard of it yet, let alone understand what it is. This is probably, at least in part, explained by the fact that most of the P2P industry cannot yet offer IFISAs because they do not have the necessary FCA permissions in place to do so. 
“Once this changes and more of the industry launches their own IFISAs, we believe, there will be more noise about it, and consequently more awareness – good news for the industry, and great for investors.”
Those that do know about IFISAs and have invested in them, have invested more on average than in traditional Cash ISAs. The average amount of GBP7,013 per person has been invested in Crowdstacker’s IFISA to date. This is compared to GBP5,810 in cash ISAs between 2015 and 2016.
Overall Crowdstacker has seen an average IFISA investment of GBP1m a month since launch, from investors across all ages. By the end of the 2016-17 tax year it will have paid out over GBP250,000 in interest to IFISA investors.
Crowdstacker aims to offer a limited range of hand-picked, higher quality P2P investment opportunities, lending to established and already successful British businesses. It has enabled investors to select and lend money to businesses in a variety of sectors including leisure, entertainment, and property. The IFISA has specifically helped businesses access the funds they need, whilst offering investor’s inflation beating potential returns as well as portfolio diversification.
“In the current economic and political climate, we believe we will see more investors being attracted to helping British businesses grow, whilst also taking control of their investments and utilising the tax efficiency offered by the ISA,” Patel says. 

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