Peer-to-peer lending bosses have heralded “record” Innovative Finance ISA (IFISA) inflows this ISA season, thanks to volatile stock markets, low-yielding cash ISAs and several large IFISA providers exiting the market.
The new tax year is well underway, and many platforms have told Peer2Peer Finance News that they have seen a rise in inflows from lenders looking to make the most of their £20,000 tax-free allowance.
Platforms have reported that much of this has come from transfer-ins from stocks and shares ISAs, cash ISAs and IFISA providers that have closed to retail investment, such as Zopa and Funding Circle which both exited the P2P sector this year.
Bruce Davis, managing director of Abundance, said the crowd bonds platform had a record run into the ISA year-end, including significant inflows of ISA monies via transfers from P2P lenders which are exiting the market but also from stocks and shares ISA providers.
“We also saw strong inflows of cash deposits into IFISA accounts reflecting the record number of projects available on our platform currently,” he added.
Similarly, EasyMoney has seen a “huge inflow of retail money”, which it put down to larger players moving away from offering IFISAs and the P2P property lending platform growing into a mature scale-up business.
“It’s been great, much better than last year, retail money is flowing in massively,” a spokesperson from the platform said.
“We’re really happy, we’re just trying to find high-quality loans, the retail money is coming in every day.
“It’s been a mixing pot of the closures or pivoting of Zopa and Funding Circle away from offering the IFISA, so we’ve seen transfers in that respect, and the EasyMoney project is starting to mature. We’re in year four or five and people are coming back and topping up their ISAs and that’s helpful.”
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Another P2P property platform, Invest & Fund, has seen a 300 per cent year-on-year increase in IFISA inflows and expects this to increase further as it has many transfers pending.
“We were predicting a strong season, both pre 21/22 season ending and the start of the 22/23 season, this has been the case as the inflows and transfers-in have exceeded our forecasts,” a spokesperson from the platform said.
The case for investing your ISA money has never been stronger, as UK inflation hit a 30-year high of seven per cent last month, further fuelling the cost of living crisis.
In contrast to inflation, the best rate for a five-year fixed cash ISA is currently 2.1 per cent, according to Moneyfacts data, while the average easy access cash ISA paid 0.38 per cent interest in April, meaning that savings are being eroded in real terms.
Unlike volatile stocks and shares ISAs, IFISAs are a fixed-income product with far more stable returns.
Exclusive Peer2Peer Finance News research released in March revealed that IFISAs outperformed the FTSE All-Share Index over the four years from 2018 to 2021. Over that period, IFISA investors have been able to enjoy average returns of approximately eight to nine per cent per annum.
“P2P investors can earn a far better return than leaving their money in a typical cash ISA account and without the ups and downs associated with equity investing,” said Ben Shaw, chief executive of HNW Lending.
Shaw reported similar IFISA inflows to last year, but noted that this was still “pretty good” given the uncertainty around the Ukraine crisis, the cost of living increase and interest rate rises.
Atuksha Poonwassie, managing director of Simple Crowdfunding, also said that her platform continues to see a significant inflow of ISA transfers-in, which she said was partly due to an increase in the number of property developers keen to offer ‘ISA-friendly’ projects through the platform.
“It is also the case that investors are looking for new homes for their ISAs to allow them to make the best use of this tax-efficient wrapper,” she added.
New entrants to the market have also reported a positive ISA season. Rishi Zaveri, chief executive of Lendwise, said inflows have been encouraging since the launch of the platform’s education-backed IFISA in January, and his team continues to monitor them.