Ratesetter is the first peer-to-peer lender to release details of the Innovative Finance Isa, which it plans to make available from April.
Features of the new Isa include:
• The choice of four products, with terms between one month and five years.
• Tax savings of up to £376 for higher rate taxpayers.
• Full annual Isa allowance of £15,240 and transfers from stocks and shares and cash Isa will be allowed.
According to a RateSetter poll of 2,090 people in December, a quarter of cash Isa holders are considering moving to the Innovative Finance Isa when it launches in April.
The new Isa is not being covered by the Financial Services Compensation Scheme.
Rhydian Lewis, chief executive at RateSetter, said the launch of the Innovative Finance Isa will provide a “massive boost” for investors.
Ratesetter will also give investors the option to choose to set their own interest rate, or accept the rate set in the markets.
There will be no management fees for investors.
Isa rules do not allow direct transfers of existing marketplace lending investments into the new Isa, however, RateSetter said it is looking at ways to make it as easy as possible for investors to open and fund the new Isa.
The four products and their rates are:
• One month term (2.8 per cent)
• One-year term (3.8 per cent)
• Three-year term (4.3 per cent)
• Five-year term (5.7 per cent)
The RateSetter Innovative Finance Isa will operate in the same way as existing RateSetter accounts.
Tony Catt, compliance officer at Anthony Catt Limited, described the rates on offer as “decent”, but said offering a one-year Isa is “pretty shocking because they shouldn’t be thinking of using an Isa over such a short term”.
He added that this product could be quite high-risk, unless the fund monitors the individual borrowers to ensure they pay the money back.