Lending Works is hoping to launch their IFISA product on April 6th, just like most other peer to peer lending platforms. They too, like many others, are awaiting final approval by the FCA to offer the new saving vehicle.
According to Lending Works, current regulation appears to permit lenders through peer-to-peer platforms to transfer unlimited funds from Cash and/or Stocks & Shares ISAs accumulated over previous financial years into an IFISA. The platform states this is in addition to the annual ISA allowance of £15,240 of new funds which lenders will be entitled to contribute to any IFISA. Lending Works is of the believe that investors are likely to be able to set up multiple IFISAs, with multiple peer-to-peer platforms to accommodate these ‘old’ ISA funds if they choose.
Nick Harding, CEO of Lending Works, called the IFISA a huge opportunity;
“We are thrilled to be a step closer to offering an Innovative Finance ISA to lenders for the 2016/17 financial year, subject to full FCA authorisation and HMRC approval as an ISA Manager. It is hugely positive for consumer lenders that investment within the framework may not be limited to their newly contributed IFISA funds. Whilst the rules underpinning this could change before 6th April, there is nevertheless little doubt that this will be extremely rewarding for our consumer lenders.”
The IFISA was first announced in the 2015 Summer Budget. Some industry followers have predicted the IFISA will dramatically boost investors in P2P assets. Investors on P2P platforms may capture better risk adjusted returns than typically experienced in other conservative investments. Lending Works is a platform that offers insurance against possible borrower defaults thus mitigating risk further.
Lending Works sees an “important ambiguity” within the ISA regulations may create a wider benefit for many current and prospective peer-to-peer investors in that such limitations do not appear to be applicable to ISA funds accumulated within Cash and/or Stocks & Shares ISAs over previous financial years, which can be classified as ‘old’ ISA money by the time IFISA goes live. This would mean that there is no upper limit to the amount that an individual lender through peer-to-peer will be able to transfer from these savings and/or investments into their new IFISA. Of course they do recognize that legislation on IFISAs remains in draft phase so things can change before April.
“The opportunity for lenders to earn tax-free returns on more than just their annual ISA allowance within an IFISA is a big boost for the product, platforms like ours, and, crucially, the customer. Even more importantly, investors are set to be able to hold multiple IFISAs with different peer-to-peer lending platforms to accommodate these ‘old’ ISA monies, and this is a vital tool in their ability to diversify their P2P investments,” said Harding. “This only adds to our excitement at the prospect of delivering this game-changing product to our customers. Once we receive the necessary permissions from the FCA and ISA Manager approval from HMRC, we will be at the ready to do so in a hassle-free manner, while keeping our lenders fully informed every step of the way.”