According to HMRC, IF ISAs (Innovative Finance ISAs) have received a marked boost in subscriptions since their introduction in 2016. The statistics for 2017/18 show that almost £300m (805% growth from 16/17) was subscribed to IF ISAs by approximately 31,000 investors (620% growth from 16/17).

However, subscriptions to Cash ISAs were still pushing the £4trn mark in 2017/18. An astonishing amount considering the low interest rate environment.

One encouraging statistic for the alternative finance market was that the average subscription for IF ISA accounts was £9,355 — compared with £6,409 for all ISA accounts in 17/18.

Advisers need to do more

What the latest HMRC statistics indicate is that the financial advisory community need to do more to get people invested — be it via an IF ISA or a Stocks and Shares ISA.

Many IF ISA providers offer services that have a fixed rate of return (between 4-8% pa). This may be more attractive to savers who do not wish to expose themselves to the volatility of equity markets, while making sure their savings are inflation beating.

What you can hold in an IF ISA

Debt Based Securities

DBS (commonly referred to as Crowd Bonds), are generally unlisted corporate bonds or loan notes with a fixed term (mostly one to three years) that deliver regular income payments.

They are mainly used to fund smaller infrastructure projects, such as renewable energy installations or asset-backed businesses, such as pubs and care homes. The annual returns on offer are typically in the range of 5-8%.

P2P Loans

P2P lending is the practice of lending directly to small businesses and consumers via an online platform.

Since they operate entirely online, P2P lenders can provide the service more cheaply than traditional financial institutions such as banks. As a result, they can offer better rates to borrowers and competitive interest to investors.

Returns on a portfolio of loans can vary, but are typically in the range of 5-6%, with less volatility than equities.

Learn more about the IF ISA

To learn more about the IF ISA and the investments that can be held within the wrapper, download our free Adviser’s Guide to the Innovative Finance ISA. You will also find details of how you can receive a complimentary hard copy.