In sixty days time, UK investors wil be able to put their money into the new IFISA (Innovative Finance ISA) and enjoy the risks and returns of peer-to-peer lending tax free.
The first provider to announce a product is RateSetter. Ratesetter is the second biggest peer-to-peer lender to individuals, according to the Liberum AltFi Volume Index, with a 20% market share, just behind Zopa.
According to Financial Reporter, investors who open an IFISA with RateSetter will be able to choose from four products, with terms ranging from one month to five years. Investors can accept the interest rate set in the markets, or choose to set their own rate. There will be no management fees for investors.
The four products (and their rates at the time of writing) are:
- One month term (2.8%)
- One year term (3.8%)
- Three year term (4.3%)
- Five year term (5.7%)
These rates compare very favourably with cash ISAs. In December 2015 the average rate on a one-year cash ISA was 1.17%.
The interest rates offered are the same ones available to RateSetter's regular customers. It's just that the platform has put the loans inside what's called an "ISA wrapper" to make the investment eligible for tax relief.
CEO Rhydian Lewis is quoted in today's Telegraph:
"We already have a product, we're just putting it within an Isa wrapper. I think banks sometimes think people will tolerate lower interest rates because it's an Isa. We don't want to do that."
The Telegraph also reports a 'choose your own rate' product, where the investor can choose a level of interest they want their money to earn. But their deposit stays on the platform and earns no interest until a borrower selects it.
We expect other platforms to announce their own offerings soon.
UPDATE: 8th October 15:00