AROUND one third of money placed into Innovative Finance ISAs (IFISA) on individual platforms in the previous tax year was from transfers rather than new money, figures indicate.
Platforms have suggested this shows savers are ditching low-paying cash ISAs for the higher returns yielded from an IFISA.
“While our average account size for IFISAs is in line with our average classic account size, standing at £8,200, we are seeing much higher value come in via ISA transfers from lower yielding cash ISAs,” Julian Cork, chief operating officer of Landbay, told Peer2Peer Finance News.
“In March, the average value of transfers into a Landbay IFISA from existing ISAs was £39,500 per customer.
“We saw the volume of transfers increase by 300 per cent between February and March and with the ISA allowance now at £20,000 we expect to see increasing volumes of investment and investors throughout the ISA season.”
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Other platforms have reported similar experiences.
LandlordInvest, which launched its IFISA in January, revealed that 28.3 per cent of funds came from transfers in the previous tax year. Co-founder Filip Karadaghi said that almost half of investment on the buy-to-let lender’s platform is now through the tax-free wrapper, amounting to around £3,000 on average per investor.
Ethical investment platform Abundance has offered its IFISA since November 2016 and said it attracted £11.2m in the last tax year, £3m of which was from transfers rather than new ISA money.
Meanwhile, Lending Works says 62 per cent of IFISA funds have come from new subscriptions since its launch in February, while the remainder was transferred from other ISAs.
“It is intriguing that a high proportion of incoming IFISA funds have come from other, pre-existing ISAs, and it is great to see so many customers choosing Lending Works by transferring their ISA from many different banks and investment managers,” said Nick Harding, founder and chief executive of Lending Works.
“We believe this represents further vindication that our sector provides a viable and beneficial alternative in terms of risk and reward.”
The figures bode well for the UK’s largest peer-to-peer lenders, who are still awaiting regulatory approval in order to offer the IFISA. A number of legal experts have told Peer2Peer Finance News that they would be extremely surprised if the ‘big three’ – Zopa, Funding Circle and RateSetter – had not received full authorisation from the Financial Conduct Authority by the end of the summer.
Read more: IFISAs may leave investors short-changed