You are here: Home - Saving & Banking - News -

Innovative Finance ISA targets 4% per year return

Written by: Paloma Kubiak
Octopus has become the latest provider to offer an Innovative Finance ISA (IFISA) and it’s targeting a 4% return for investors.

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:

  • Abundance
  • Crowdstacker
  • Folk 2 folk
  • Kuflink
  • Landbay
  • Lending works
  • Zopa

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.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

If one of your jobs this month is to get your finances in order, moving your savings to a higher paying deal i...

Coronavirus and your finances: what help can you get?

News and updates on everything to do with coronavirus and your personal finances.

Everything you need to know about being furloughed

If you’ve been ‘furloughed’ by your company, here’s what it means…

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Lifetime mortgage market to reach £3bn: could it work for you?

Legal and General has become the largest provider of lifetime mortgages and predicts the market will reach £3bn in 2017....