Is it time for an innovative Isa? Returns of 7 per cent can be achieved from peer-to-peer lending platforms

SAVERS frustrated by record low interest rates on cash Isas can now earn more than 7 per cent a year, tax free, by investing in the new Innovative Finance Isa from Money&Co.

This pioneering Isa gives savers access to higher returns available from peer-to-peer (P2P), lending platforms, totally free of tax.

Renowned fund manager Nicola Horlick, founder of P2P platform Money&Co., said savers finally have a real alternative.

“Britons hold an incredible £270billion in cash Isas, often earning next to no interest. They could get a far better return by diverting some of this into an Innovative Finance Isa.”

The Innovative Finance Isa, or Ifisa, is an alternative to traditional cash and stocks and shares Isas.

It offers a projected return of 7.3 per cent a year, easily beating the 1.2 per cent a year paid by the average cash Isa.

“This is your chance to wake up your money and put it back to work again,” Horlick said. LENDING CRITERIA You can invest your entire £20,000 Isa allowance with Money&Co. if you have the money, or start with smaller sums.

You can also transfer funds held in existing Isas. Horlick said: “Why put up with 1 per cent when you could get more than 7 per cent?”

Money&Co. pays income monthly, either directly into your Money&Co. which can then be transferred into a bank account, or reinvested for further growth.

It is important to note that this income is not guaranteed and your capital is at risk, with no protection from the Financial Services Compensation Scheme.

Horlick added that Money&Co. has introduced further safeguards.

“We avoid risky start-ups and only lend to profitable businesses that have been trading for at least three full years,” she said.

All have been carefully selected by Money&Co.’s head of credit and must pass strict lending criteria, Horlick added.

“We prefer to lend to companies with assets such as property or manufacturing equipment to use as security,” she said.

This means that even though your money is at risk, losses should be kept to a minimum. RISKS AND REWARDS You can choose which companies you lend to. To help guide your choice, Money&Co. gives them one of five credit ratings, from A+ for the safest to C+ for the most risky.

The safest A+ loan is likely to yield around 7 per cent, but you could get as much as 9 or 10 per cent.

“This means you can go into it with your eyes open, understanding the potential risks as well as the rewards,” Horlick said.

The average yield across all Money&Co. loans is 8.6 per cent, before annual charges of 1 per cent.

Money&Co. has been lending since April 2014 and to date, there have been no bad debts and minimal defaults.

Money&Co. is regulated by the Financial Conduct Authority. For further advice on Ifisas, speak to your independent financial advisor.