61% of UK savers acknowledge possibility of higher returns and better interest rates with IFISAs, but majority still don’t understand the service 

Over a third (36%) of UK savers would place their money in an IFISA if they had the money available. The question is, what does the industry need to do to gain the trust of the undecided two thirds?

While a large proportion acknowledge the prospect of higher returns (61%) alongside the allure of the tax-free wrapper and greater diversification, the IFISA is still a hard sell, according to research undertaken by P2P lending service ArchOver. In truth, the majority of UK savers (57%) still don’t fully understand the service. Unlike cash ISAs, money invested in an IFISA is not protected under the Financial Services Compensation Scheme (FSCS). As such, savers need to be confident in the strength and stability of the underlying businesses they are investing in. They must seek out lending schemes that provide deep insight into borrowers as well as all robust processes and security.

IFISAs present a greater risk when compared to a standard cash ISA, but the potential reward is exponentially higher. ArchOver CEO Angus Dent explains, “IFISAs are fundamentally different to cash ISAs in the way they operate. Meeting investors’ expectations and making them feel secure at the same time will require ongoing education. Our research shows that nearly half (48%) of savers are nervous about losing their money, so the industry needs to communicate the benefits and safeguards clearly”.

“The IFISA gives you the freedom and flexibility to choose your own investment. Investors must use that power to choose an option which combines the best elements of P2P lending: thorough due diligence, rigorous lender security and favourable returns. They must do their research to gain insight into the companies they’re investing in and should not ignore the job of diversifying their portfolio to balance out their risk.”

Over a quarter (26%) of savers say they are reassured by regulatory oversight such as the Financial Conduct Authority’s (FCA) recent approval of a number of P2P providers, including ArchOver. Dent reassures concerned savers, saying that “although IFISAs have an associated risk like all investments, investors and savers can get a greater level comfort by choosing a P2P platform that carries out stringent due diligence and credit analysis of all potential borrowers”.

“Now is a crucial time for the sector to raise awareness around IFISAs and how they work. We must make sure that investors and savers have all the information they need when looking at IFISA options. Ultimately, we need to remember why P2P was created in the first place – to offer more choice and transparency when participating in project-by-project lending”, concludes Dent.