With the numbers released yesterday that inflation in the UK has increased to 2.7% (the fastest rate of increase since September 2013), it is no wonder that people are looking for ways to put their money to work. This may explain the growth of the peer-to-peer (P2P) sector as investors look to alternative asset classes to make a return.
ISAs have long been a good vehicle for investors to make the most of their money as returns from an ISA account are tax-free. The alternative finance sector has been allowed to offer the Innovative Finance ISA (IFISA) which provides some diversity to the ISA market.
Where previously you had the choice between Cash ISAs with low rates (most pay between 1-1.75%) or Stocks & Shares ISAs with volatile tendencies; Innovative Finance ISAs sit in between the two.
So what does the Innovative Finance ISA offer to investors?
- Fixed Income
Most Innovative Finance ISA products will have a set rate that investors can see. Whether it’s one set rate product or a self-select service where investors can choose which rates they are invested in, investors will be able know right from the outset what sort of returns they can expect. Interest is paid out on a monthly or quarterly basis so you have the choice to reinvest it and grow your money even further. - 2. Choice of Investment
There are numerous peer-to-peer platforms on the market that all have their own unique offering. It is possible to diversify your portfolio across consumer, small and medium-sized business or commercial real estate lending. - 3. Tax Efficiency
Returns made through an IFISA account are tax-free which can help amplify the effects of investing in peer-to-peer loans.
Overall the IFISA is another way investors can diversify their holdings. However, investors must understand that the higher rates it presents also mean higher risks (P2P investments are not covered by the Financial Services Compensation Scheme (FSCS) and capital is at risk).
If you wish to register for a Relendex IFISA - Sign up here!
