Game-changing £15,000 P2P ISA consultation
By James Tall | Fri 17 Oct 14
By James Tall | Fri 17 Oct 14
The government has today published its much anticipated consultation on how P2P loans will be included within ISAs.
It marks a tipping point for the UK P2P market. It is estimated that ISA inclusion will see the sector grow from £2bn to £45bn over the next few years. It also highlights the industry's shift from niche into mainstream.
In many ways, this is bigger news than the recent increase in the ISA allowance to £15,000. Why? Because it adds a brand new alternative to the financial landscape.
David Gauke, the Financial Secretary to the Treasury, said:
"We want to support savers at all stages of their life and make sure they have greater flexibility and choice over how they invest and access their
"P2P lending is an exciting, innovative new sector and it's right that investors who want to lend money via P2P platforms should be able to hold these loans in their ISA alongside more traditional investments."
A close collaboration
We have been working with the Treasury and our industry peers ever since George Osborne's announcement about the P2P ISA back in the March budget. We are of course delighted that the consultation has now been launched.
The government wants to encourage greater competition in financial services. We couldn't agree more. RateSetter was created with the retail saver in mind to return more value to the customer.
Allowing P2P loans to be held in ISAs also supports the government's aim to diversify the different sources of finance that are available to borrowers by encouraging the growth of the P2P lending sector.
By allowing the higher rates of interest on offer to be shielded from tax, the inclusion of P2P will breathe new life into ISAs. And the appetite is certainly there: research we carried out with Populus earlier this year revealed that two-thirds of people will consider trying P2P when it is ISA-able.
A 'Third ISA'?
Options include P2P loans being held within the existing Stocks & Shares ISA or the exciting idea of a new third type of ISA - a P2P ISA.
We believe that giving savers more choice must be at the heart of this decision. As such, we have led the way in promoting a ' Third ISA'.
It is great news that government is considering a third ISA category to open up a new choice to the polarised options of cash or investments - providing that missing link between low returns and high risk.
This bold new product would be a healthy middle ground, especially when you consider recent volatility in the stock market.
The government has also already agreed that the P2P platforms will be able to act as ISA Managers, offering their own products and retaining that direct contact that we pride ourselves on -and that has made the industry popular.
The consultation closes on 12 December 2014. So don't miss out! You can read the consultation here.
Once it has closed, the government will review responses and publish a summary document. Taking all views into account, the necessary legislation will be amended to pave the way for P2P to be included in ISAs.
This process means that we can't set a fixed date at this point for implementation.
Our priority at RateSetter will be to make sure we are ready. Importantly this won't change our prudent approach to building our business in the best interests of our customers.
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Update: The peer-to-peer ISA is here! Click on the IFISA guide to learn more.
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