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Cash ISA savers make the switch to Innovative Finance


With ISA season well underway, LendingCrowd reveals that transfers to its fintech lending platform are more likely to come from Cash ISAs than any other type of tax-free account.

LendingCrowd, which launched in late 2014, was one of the first platforms to offer an Innovative Finance ISA (IFISA) and now has three different investing options, all of which can be held within the same tax-free wrapper.

Edinburgh-based LendingCrowd is regulated by the Financial Conduct Authority and specialises in lending to established British business. Its analysis shows that, since launching its IFISA in February 2017, 66% of transfers have been from Cash ISAs.

Meanwhile, Stocks & Shares ISAs accounted for 18% of transfers to LendingCrowd, and the remaining 16% were from IFISAs previously held with rival fintech platforms. In value terms, Cash ISAs made up 68% of the total transferred to LendingCrowd, while Stocks & Shares ISAs accounted for 23% and IFISAs 9%.

IFISAs, which were introduced by the UK Government in April 2016 and can only be provided by platforms that are authorised by HM Revenue & Customs, enable investors to earn tax-free* interest and income on peer-to-peer loans.

According to a survey by trade body TISA (Tax Incentivised Savings Association), over £620 million was invested in IFISAs by February 2019. That is more than double the £290 million that HM Revenue & Customs (HMRC) said was held in IFISAs at the end of 2017/18 tax year.

HMRC data shows that the average investment in an IFISA last tax year was £9,355 – that compares with the average Cash ISA subscription of £5,114. The number of Cash ISAs opened each year has been falling steadily for the past decade – from 12.2 million in 2008/09 to 7.8 million in 2017/18.

With inflation currently running at 1.8%, money held in many Cash ISAs is actually falling in value once the cost of living is taken into account. According to personal finance data provider Moneyfacts, the highest rate offered by an instant-access Cash ISA is 1.5%.

LendingCrowd’s Growth ISA targets a return of 6% a year by automatically creating a diversified portfolio of business loans. Capital and interest repayments are automatically reinvested in additional loans, increasing diversification over time. The platform’s Income ISA works in a similar way, with the key difference being that investors can withdraw their interest while their capital repayments are reinvested.

For sophisticated investors who have the time to hand-pick the business they want to lend to, LendingCrowd offers a Self Select ISA. Lending rates range from 5.95% to 14.25%, depending on the borrower’s credit rating.

Stuart Lunn, founder and CEO of LendingCrowd, said: “It’s clear that Cash ISAs are falling out of favour among savers who are tired of seeing the value of their money eroded by inflation. Our IFISA is proving extremely popular, and we expect demand to continue rising rapidly as more people realise their money could be working much harder for them.”

LendingCrowd is currently offering new and existing investors up to 3% cashback when they invest at least £2,500 on the platform by 30 April 2019. Those who transfer an ISA of £5,000 or more from another provider can earn an additional £50 bonus. Terms apply. For more details, visit: www.lendingcrowd.com/isa-season-2019-cashback-offer/

*Tax treatment depends on the individual circumstances of each investor and may be subject to change in future. LendingCrowd and its Innovative Finance ISA products are not covered by the Financial Services Compensation Scheme.

**Capital at risk. The 6% target rate is variable, net of ongoing repayment fees, estimated bad debt and before the 1% capital withdrawal fee.

About LendingCrowd

Founded in 2014 and based in Edinburgh, LendingCrowd matches investors looking for a greater return with small businesses seeking finance to grow. LendingCrowd has facilitated over 610 loans to SMEs across Britain, totalling more than £53 million (with over £12 million loaned in Scotland). The company was one of the first fintech lenders to receive full FCA authorisation in 2016 and launched its first Growth ISA in 2017. To date, almost 7,000 investors have signed up to the platform. LendingCrowd is backed by Scottish angel syndicate Equity Gap, the Scottish Investment Bank (the investment arm of Scottish Enterprise) and a number of prominent investors from Scotland’s finance and entrepreneurial scene.

Article author

Gareth Mackie

Gareth Mackie

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If you invest through LendingCrowd you should understand that your capital is at risk.

LendingCrowd is the trading name of Edinburgh Alternative Finance Limited, Company Number SC468392, authorised and regulated by the Financial Conduct Authority (Firm reference number 670991). LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.

Read more about the risk involved when investing and borrowing.

The company's registered office is 23 Manor Place, Edinburgh, EH3 7DX.

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