First reported in 2020, it has now been confirmed in HMRC statistics published on 8th June 2021 that the Innovative Finance ISA (IFISA) exceeded £1 billion in inflows in 2019/20.
The significant milestone was revealed alongside other figures, including a 33.5% increase in the amount invested into an IFISA – at £438 million compared to £328 million in 2018/19 – as well as the average amount held rising from £8,632 to £12,882.
This is positive news for the IFISA market, which has seen rapid growth since its introduction in April 2016. With a strong 5,000 accounts opened in its first year, as of 2019/20, that number stands at 126,000 – with confidence in the IFISA and its eligible assets seeing a clear increase.
Allowing experienced investors to utilise their annual ISA allowance to hold peer-to-peer loans and debt-based securities under the ISA tax wrapper for the first time, it’s unsurprising that the figures are showing optimistic growth.
And since the beginning of 2020 – when the Coronavirus crisis took hold – the IFISA has further shown its resilience and subsequent importance as an addition to an investors ISA portfolio.
As Cash ISA interest rates fell to an all time low in response to a drop in the Bank of England’s base rate and the Stocks and Shares ISA took a hit as the stock market suffered severe fluctuations, some of the alternative assets that can be held in an IFISA proved to be buoyant.
For example, the gap between supply and demand within the UK’s housing market was highlighted once more after various lockdowns and working from home caused people to re-evaluate their living situations – giving rise to the housing mini-boom.
For investors into property bonds – which can often be held in an IFISA – this was good news. The alternative finance generated from property bonds supports small and medium-sized housebuilders in delivering the housing the UK needs the most. And with the surge in demand from prospective home-movers amidst an ongoing housing shortage, the need for this will only increase.
A strong investment consideration
The new figures reveal just how strong of an investment consideration the IFISA is.
Experienced investors with the appropriate risk appetite can target generous, tax-free potential returns with the product, whilst also investing for impact with the confidence that demand for IFISA-eligible assets is climbing.
And after 18 months in which most other ISAs have seen a negative impact, its expected the IFISA will just grow further.