Relendex has launched its Innovative Finance ISA (IFISA) tax free wrapper for peer-to-peer (P2P) secured property loans.
The UK Government introduced the IFISA in April 2016 to sit alongside existing Cash, Stocks & Shares and Lifetime ISA products.
The Relendex ISA will work in a similar way to its regular accounts: lenders will decide which loans to invest in and can build their own diversified portfolio of loans. Through the IFISA, lenders can benefit tax-free returns on loans secured against UK property.
Michael Lynn, founder and CEO of Relendex, says: “Many people have built up a significant nest-egg in their tax-free ISA, but in the low-interest environment Cash ISAs are only earning around 0.5 per cent pa and Stocks & Share ISAs are potentially quite volatile and therefore investors’ capital is at risk. A secured lending P2P ISA is the best of both worlds. The yield is good at between 6 and 10 per cent pa, tax-free and there is considerable capital protection in the form of security over independently-valued UK property assets. Of course property values can fall, but since our average Loan-to-Value is around 60 per cent, the property concerned would need to fall 40 per cent on average before any loss would result.
“So if ISA investors are thinking of using this year’s Annual ISA Allowance or transferring existing ISA funds to a Relendex IFISA Account, they can build a diversified portfolio of good quality loans and achieve a good yield. They can also reinvest the gross interest, to achieve compound growth and build their capital.”
The Relendex ISA is a non-flexible ISA. This means that all new subscriptions made during a tax year will count towards the subscription limit for such tax year and cannot be replaced.
Lynn explains: “Our lenders see us as a longer term investment, although we do provide a secondary market if they decide to sell on early. A non-flexible ISA recognises this longer-term demand and allows us to offer the ISA without any fees.
“Also, ISA holders are responsible for adhering to the HMRC annual ISA Allowance, so we track their subscriptions so they don’t inadvertently exceed their annual allowance with us.”