The Peer to Peer Finance Association (P2PFA) in the UK has consistently advocated for a separate ISA only for P2P assets. While recognition has grown that alternative assets should be allowed into retirement accounts, the P2PFA believes it is prudent to separate debt from equity. The P2PFA has risen to become an important voice and advocate for the P2P lending industry. The entity represents a majority of the industry and has established important best practices that have boosted industry growth.
As part of the Autumn Statement and the Spending Review, it was confirmed that the forthcoming Innovative Finance ISA will not include equity crowdfunding. At least for the time being.
Christine Farnish, Chair of the P2PFA, commented on the announcement;
“This decision is welcome. We believe the risk of this asset class is closer to stocks and shares than a peer-to-peer loan. It is important that consumers are not confused by mixing up equity-based products to debt-based products.”
P2P assets do maintain a lower risk profile in contrast to equity. While equity crowdfunding platforms have moved upstream to finance more established companies, instead of only startups, equity by nature is a riskier investment.
According to the UK government;
The list of qualifying investments for the new Innovative Finance ISA will be extended in Autumn 2016 to include debt securities offered via crowdfunding platforms. The government will continue to explore the case for extending the list to include equity crowdfunding.
At this writing, it was not completely clear if min-bonds would be initially included as a qualifying investment for the Innovative Finance ISA.
Expectations from the P2P lending sector is that ISA inclusion will drive greater consumer interest and aid in the growth of the direct lending industry.