1st March 2022
It’s now no longer appealing for savers to hold cash ISAs due to the low interest rates they offer. But savers can still make moves to safeguard their future. By investing in the Government’s IFISA (Innovative Finance Individual Savings Account), UK residents can invest up to £20,000 tax-free while potentially earning 6% to 15% APR before fees and bad debt.
The economic outlook
The current economic climate has resulted in best-buy traditional ISA products offering interest rates no higher than around 1.2%. On this basis, transferring funds or retaining funds in a cash ISA will not even allow your savings to grow in line with inflation - normally around 3% per annum. Put simply, storing funds in cash ISAs will result in you losing money every day that funds are retained there. The reason for this is that the purchasing power of your cash will diminish due to it not being able to keep up with inflation growth.
A brief lowdown on ISAs
The cash ISA was first introduced in 1999 to encourage people to save for their future. Today, the current year’s tax-free ISA allowance is £20,000. As long as cash is held within the ISA wrapper, the growth on the funds is shielded from tax. Originally the rates of interest held on these accounts were favourable, however, there are now close to two decades’ worth of cash ISA allowances still in existence that are accruing virtually no interest.
Introducing the IFISA
In the 2015/16 tax year the Government introduced the Innovative Finance ISA (IFISA). This allows savers and investors to lend their money to growing British businesses through qualifying P2P (peer-to-peer) lending platforms. Crowd2Fund’s IFISA is one of just a handful of products on the market allowing savers and investors to do this, offering returns of 6% to 15% before fees and bad debt. For savers to counter their cash ISA’s reduced purchasing power, a different mindset is needed to turn them into investors. Savers are encouraged to spread their risk by deploying their funds across a range of different businesses in different sectors, including hospitality, construction, and retail. An additional benefit of using Crowd2Fund’s IFISA, other than the potential of higher returns, is that you’re also helping the British economy by aiding the growth of British businesses.
Transfer Your Cash ISA
You can help prevent historic cash ISA funds from stalling in value by transferring them to an IFSA while keeping all of the funds in their tax-free wrapper. Before doing this it’s important to follow certain steps to ensure your funds remain tax-free. Crowd2Fund makes the transfer process easy and will coordinate with your old ISA manager on your behalf to make the transition process as stress-free as possible
How To Transfer Your Cash ISA to an IFISA
Once you have signed up with your new IFISA provider, you’ll need to complete a form to transfer old funds. The form is relatively simple and asks for basic details, including information about your old ISA provider, as well as your permission for the transfer of funds. Once the form has been completed it should take around 15 days to be processed. Your new provider will be obliged to pay interest if the transfer takes more than 15 days. There’s no limit on the amount of ISAs you can move at any one time but you will need to complete one form for each provider. You can transfer all your ISA funds to an IFISA manager and the funds will remain in the tax wrapper, meaning any earnings from these funds will not be eligible for tax.
Transfer your ISA now by completing the form below:
Past performance and forecasts are not reliable indicators of future results. Tax treatment of any of the investment offers will depend on the individual circumstances of each investor and may be subject to change in the future. If you are unsure about any aspect of the information provided by the company, you should seek advice from an independent financial adviser. Do not invest more than you can afford to lose. Investing in start-ups and early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Investing in start-ups may expose the individual concerned to a significant risk of losing all of the money or other assets invested. Peer-to-business lending through Crowd2Fund is not the same as holding a bank or building society savings account. When making a peer-to-business loan, your capital lent to a borrower is not covered for compensation in the event of a loss by the Financial Services Compensation Scheme. It may prove impossible to recover all or part of the loan by calling in the business assets held as security on that loan. Reward and Donation funding types are not regulated by the Financial Conduct Authority Crowd2Fund Limited is authorised and regulated by the Financial Conduct Authority (FRN 623683). Crowd2Fund Limited is registered in England and Wales. Registered No. 08472687 Registered Address: 242 Acklam Road, London, W10 5JJ.
Past performance and forecasts are not reliable indicators of future results. Your capital invested is not covered for compensation in the event of a loss by the FSCS. Tax treatment will depend on the individual circumstances and may be subject to change. Please see our Risk section before making an investment decision.