One in seven Isa investors say they will definitely take advantage of new rules enabling them to withdraw money and reinvest without affecting their tax-free allowance, according to Yorkshire Building Society research.
A survey of 1,020 UK adults, carried out by Consumer Intelligence in May, found that one in five (19 per cent) of those who do not already save in an Isa are expecting to open one, while almost one in four (23 per cent) are planning to increase their deposit amounts and 11 per cent said they definitely will not take advantage of the changes.
When extrapolated using government figures for existing Isa savers, this means around 405,000 people are expected to invest in peer-to-peer lending when it becomes part of the tax-free scheme next year.
New investors and people increasing their investments expect on average to contribute £95 a month – more than £1,100 a year – with the majority planning to save into cash Isas and bank and building society saving accounts.
Earlier this summer, the government announced the introduction of an Innovative Finance Isa for loans arranged through a peer-to-peer platform from April 2016.
The Yorkshire stated that the separate category of Isa should help consumers better understand the risks of investing in this relatively new market, including the lack of Financial Services Compensation Scheme protection.
Research among a sample of 1,541 UK adults during January showed a lack of understanding of P2P among consumers, with only 42 per cent claiming to be familiar with the term and, of those, 60 per cent being unaware they had no protection under the FSCS.
Andy Caton, executive director at the building society, commented: “Areas such as P2P and individual share investments can offer higher returns but are not covered by safeguards such as the FSCS; education is vital if the savings revolution is to deliver as promised.”
Another survey, conducted online via PollRight among a sample of 101 financial advisers in May, found that 45 per cent believe the increased Isa flexibility will generate more awareness of P2P, with 6 per cent of advisers predicting a considerable rise consideration from consumers.
Phil Marten, chartered financial planner at Octagon Consultancy, told FTAdviser that the Yorkshire’s figures look right in terms of what his clients have been saying.
He said: “Most focus on the best interest rate and if this is peer-to-peer lending producing a higher interest rate - which it will - it is a worry that clients will jump on board P2P thinking that it is as safe and as regulated as a bank deposit.”
Mel Kenny, chartered financial planner at Radcliffe & Newlands, said: “I can quite easily see instances where short term cash flow issues have meant people have had to dip into their cash Isa and up until now, unable to replenish so the new flexibility around contributions is a good thing.”
peter.walker@ft.com
