Innovative Finance ISA targets 4% per year return
The Octopus Choice ISA targets an annual income of 4% per year, though this is not guaranteed.
The minimum investment level in the peer-to-peer lender is £10 tax-free, up to the annual ISA allowance, currently £20,000 for the 2017/18 tax year. There are no up-front fees or ongoing charges.
The money is invested in loans secured against property in the UK via its lending arm, Octopus Property. Since its launch in 2009, Octopus Property has lent out over £2.6bn and claims a default rate of less than 0.1%.
Sam Handfield-Jones, head of Octopus Choice, said: “I believe at a time of low interest rates, rising inflation and ever-present stock market instability, an alternative tax-efficient investment solution has never been more important or valuable to investors.”
Innovative Finance ISA
This type of ISA launched in April 2016. It allows people who invest in peer-to-peer loans to save within a tax wrapper, meaning they get tax free returns. Peer-to peer lending connects savers directly with borrowers, cutting out the middleman – the banks.
Interest rates on offer tend to be higher than you’d get on a traditional cash ISA but the risks are greater and there is no Financial Services Compensation Scheme (FSCS) protection if something goes wrong.
Despite the ISA being around for more than a year, only peer-to-peer lending platforms with full ISA manager authorisation from the regulator, the Financial Conduct Authority, are able to offer the IFISA.
To date, these are the more familiar peer-to-peer providers that have full IFISA authorisation:
- Folk 2 folk
- Lending works
Ratesetter, one of the mainstream players in the P2P market, revealed details of its IFISA last year but it confirmed it is still awaiting full approval from the FCA.
P2P lender ThinCats also today confirmed it’s received full authorisation from the FCA.