IFISA inflows set to decline this tax year due to CBILS and Covid-19

Innovative Finance ISA (IFISA) inflows are likely to be markedly smaller this tax year, as some of the biggest providers close off to new investors.

Funding Circle and LendingCrowd, which both have IFISA products, temporarily closed to retail investment when they began lending under the coronavirus business interruption loan scheme (CBILS).

“We’re expecting new inflow to be lower than previous years due to lending currently being focused on CBILS,” a LendingCrowd spokesperson told Peer2Peer Finance News.

Read more: Revealed! The CBILS P2P lenders that are still open for retail investors

As of April 2020, when Funding Circle paused lending for retail investors, around £470m had been lent through its IFISA product cumulatively.

Funding Circle declined to comment on this tax year’s IFISA intake.

Meanwhile, RateSetter, which was previously the largest IFISA provider, is expected to see a drop in IFISA inflows since the platform closed its doors to new retail investment earlier this year. Existing investors can still invest in the platform’s P2P loans using the IFISA wrapper.

But following Metro Bank’s acquisition of the platform in September, the challenger bank will be the sole funder of any new consumer loans through RateSetter.

RateSetter declined to comment.

Read more: Retail investors still have a place in P2P

Other platforms have already reported a fall in IFISA inflows due to the impact of the pandemic.

In August, Money&Co’s chief executive Nicola Horlick said its IFISA had attracted around five per cent of the volumes this tax year that it took in the previous tax year.

“I think it’s a combination of two things, some investors preferred cash and when the stock market crashed others invested in stocks and shares because they thought it would recover,” Horlick said.

“Covid-19’s hit our IFISA inflows – I don’t know what happened to others.”

Several other platforms paused all investment during the crisis, which is also likely to have impacted IFISA inflows.

JustUs and Crowd2Fund both closed to new investment earlier in the year but reopened to new money in September. Lending Works has been closed for all new investments since April and Octopus Choice stopped all transactions in March.

However, there are some green shoots, as other platforms enter the IFISA market. P2P property lending platform Invest & Fund has reported huge demand from new investors for its IFISA, which was launched in June, and Leap Lending launched its own tax wrapper in July.

FutureBricks and Lendwise are also planning to launch their own IFISAs.

The IFISA market is believed to have broken the £1bn barrier in the 2019/2020 tax year, according to data from The Investing and Saving Alliance (Tisa).

The total amount invested in the IFISA tax wrapper, based on figures from its own members, reached £1.14bn by February 2020, with still a few months to go before the tax year ends. P2P lending members of Tisa include Zopa and RateSetter.

No further statistics have been published from Tisa members since the pandemic hit the UK.

In contrast, the latest HMRC data released in June – based on ISA manager returns for the 2018/2019 tax year – shows £328m was invested in IFISAs from 38,000 accounts. This is up from £277m invested in the 2017/2018 tax year but there were 49,000 account openings during that year.

The figures take the total invested in IFISAs to £641m across 92,000 accounts. HMRC is still claiming the subscription figures are unreliable though due to a low level of data.