June 25, 2018
Investors are voting with their feet and abandoning Cash ISAs, according to our Q2 Investor Barometer survey.
We recently canvassed the views of our investors and learned that while 52% of investors responding to the Investor Barometer had put money into cash ISAs in Q1, only 37% still do following the end of this year’s ‘ISA season’.
Q2’s data shows that 61% are making use of a Stocks and Shares ISA, 60% had an Innovative Finance ISA, while a small minority were invested in Lifetime or Help to Buy ISAs (4% and 3% respectively).
According to Defaqto*, in March 2018 the average interest rate offered by a cash ISA was 0.70%. This is consistent with Bank of England interest data** on bank and building society general deposit accounts to March 2018, with sight deposits offering an average of 0.46% and time deposits an average of 0.90%. With inflation at 2.4% in April 2018, the rates currently offered by banks see consumers effectively losing money in real terms.
Our CEO, Stuart Law, said: “Given our investors are familiar with peer-to-peer lending we’d expect to see more opt for an Innovative Finance ISA than the general public, but it is still notable to see this significant drop in Cash ISA users."
“Our IFISA has grown steadily in popularity since launch. As of the end of May, almost £50m has been invested in our ISAs – over £12.5m of which has come from transfers. Around 75% of all investment in our ISA is new money on the platform and the average size of an ISA account is approaching £15,000, which is a lot higher than the industry average of £4,400.
“We believe much of this is driven by a movement away from Cash ISAs and we expect this to continue as consumers look to make their money work harder for them. We also put this down to the secured nature of our peer-to-peer loans and our credible levels of net returns when compared to many of our competitors, according to AltFi Data market analysis, as well as our long track record in the industry.”