Innovative Finance ISA

IFISAs beat the FTSE 100 by more than 15 per cent last year

Every single Innovative Finance ISA beat the FTSE 100 last year, multiple peer-to-peer platforms and alternative lenders have confirmed.

The FTSE 100 ended 2018 at a 12.5 per cent loss – the worst performance since the global financial crisis. The stock market suffered from a combination of political instability and slowing economic growth throughout the year, while uncertainty around Brexit led to a weakened pound and a drop in consumer spending.

By contrast, every IFISA returned a minimum of 3.1 per cent to investors, meaning that IFISA returns beat FTSE 100 returns by more than 15 per cent over the course of the year.

The three largest IFISA providers – RateSetter, Funding Circle and Zopa – all reported inflation-beating returns in 2018.

RateSetter’s rolling market paid out an average of 3.1 per cent in returns, while Funding Circle has predicted annualised returns of between 5.1 per cent and six per cent, after fees and defaults. And investors in Zopa’s Plus account earned 5.2 per cent in 2018 – 17.7 per cent above the cumulative annual returns of the FTSE 100.

Meanwhile, the average cash ISA paid out just 0.2 per cent in interest last year, while inflation rose as high as 2.7 per cent. This meant that cash savers effectively saw their money lose value last year, despite the tax-free advantages offered by the ISA wrapper.

“We launched RateSetter to help people earn more on their money, filling the gap between the safety, but low returns, of cash savings and the volatility of shares,” said RateSetter’s chief investments officer Mario Lupori. “Increasingly, investors are finding that RateSetter offers healthy, steady returns in exchange for accepting an element of risk.”

Originally Published: Friday, January 25th, 2019
Updated: Friday, January 25th, 2019

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