Innovative Finance ISA FAQs
The Innovative Finance ISA is one of the most significant developments for the ISA since the tax-free wrapper was launched in 1999. In preparation for the launch hear Peter Behrens, CCO and Lucy Bott, Head of Customer Operations answer the big questions about the new ISA.
Below you'll also find answers to some more of the most common questions about the product and how to stay up to date with the latest news.
When will the RateSetter Innovative Finance ISA be available?
In order to offer an IF ISA, a peer to peer lending platform must be fully authorised by the Financial Conduct Authority, which regulates the industry. At the moment, all of the major peer-to-peer lending platforms, including RateSetter, are working with the FCA to secure full authorisation.
The best way to stay up to date and ensure you are first to hear about the launch is to sign up to our IF ISA email updates at the bottom of this page.
How will I be able to open one?
You'll be able to open a RateSetter ISA by signing up on the RateSetter homepage when the IF ISA launches. If you already have a RateSetter account, you will be able to open an ISA account which will operate alongside your existing account on the RateSetter platform.
What is the difference between an IF ISA and a cash or stocks and shares ISA?
The Innovative Finance ISA makes it possible to invest through peer-to-peer platforms such as RateSetter, tax-free. Currently, if you want to invest using your tax-free ISA wrapper, you're restricted to two options:
- Put your money into Cash ISA accounts, which benefit from FSCS protection and currently pay a low rate of interest. One year cash ISAs pay an average of 0.86%, as of November 2016 (source: Bank of England data accessed on 5 January 2017).
- Invest in a Stocks and Shares ISA, which can be risky and volatile, but has the potential for higher returns.
When the IF ISA launches, you'll be able to invest in a new asset class: peer-to-peer lending. Peer-to-peer lending is riskier than FSCS-backed cash accounts, and capital is at risk. However, with that risk comes higher returns – RateSetter's markets currently pay annualised rates of between 2.1% and 4.3% depending on how long you'd like to invest for.
Our Provision Fund also means that to date, no individual investor has lost a penny. Past performance is not a guarantee of the future. However, it’s a track record we go out of our way to maintain.
How will the RateSetter ISA differ from a RateSetter general investment account?
The RateSetter ISA will work in exactly the same way as a RateSetter general investment account. The only difference for investors is that the investing will be done inside a tax-free wrapper in a separate part of the RateSetter account, meaning that all returns are tax-free. We are aiming to make it as straightforward as possible for investors to open a RateSetter ISA and to be able to manage this alongside their general investment account.
Do I need to be an existing investor of RateSetter in order to open an IF ISA?
No: the RateSetter ISA will be open to both new and existing investors.
I have existing money on the RateSetter platform – will it be possible to move this into an IF ISA?
ISA rules, set out by the Treasury, do not allow direct transfers of existing loan investments into an IF ISA. However, RateSetter investors will be able to sell out of their existing loan parts, assuming that there are other investors willing to take their place, and then reinvest their money within the ISA wrapper. Fees will apply if you want to withdraw money early from our 1 and 5 year markets, but not for our Rolling market: visit our website for more information on early access. In addition, any money held in cash in the holding account will be able to be transferred into the new RateSetter ISA.
Funding a RateSetter ISA from an existing RateSetter account will be restricted to the annual ISA allowance of £20,000.
RateSetter is looking at ways to make it as easy as possible for investors to open and fund a RateSetter ISA, so this may change in future.
I have some money in a Cash ISA which is paying a very low level of interest – can I transfer this to a RateSetter ISA?
Absolutely – it will be possible to transfer existing Cash and Stocks and Shares ISAs into an IF ISA. Previous years' subscriptions can be transferred in whole or in part (depending on the terms of conditions of your existing provider), and as such these will not use the annual ISA allowance and are therefore unrestricted in size. The current year's subscription can only be transferred in full. It's worth noting that up to £75,000 held in a cash ISA is protected by the Government through the FSCS, whereas investments through RateSetter are not.
We will be providing details on our website as to how these transfers-in will be processed.
Our Provision Fund means that to date, no individual investor has lost a penny. Past performance is not a guarantee of the future. However, it’s a track record we go out of our way to maintain.
How much can I invest in a RateSetter ISA?
You can invest up to £20,000 into a RateSetter ISA in the first tax year (2016-17).
However, you can also transfer in an unlimited amount from existing Stocks and Shares and Cash ISAs.
Can I invest in both a RateSetter ISA and another type of ISA?
Yes, you'll be able to split your allowance between a Cash ISA, a Stocks and Shares ISA and an Innovative Finance ISA as you wish. For example you might wish to put £5,000 in cash, £5,000 in stocks and shares and £20,000 in peer-to-peer investments, or put all of your allowance in just one of these products.
How do I stay up to date on the RateSetter ISA?
If you want to receive the latest information about the forthcoming launch of the RateSetter ISA, you can do by submitting your email address below.