As we review the good returns available from our latest loan offering - with more in the pipeline - we revisit the alternatives.
Money&Co. has conducted research that reveals the average return on Cash ISAs. Bear in mind that the current rate of retail price inflation in the UK stands at 3 per cent. The average Cash ISA yield came out at 1.03 per cent. That's a big disappointment for income-dependent savers and investors.
Money&Co. looked at 233 ISA-investable cash accounts. The highest-yielding account required cash to be locked up for five years at a rate of 2.11 per cent. See a spread sheet of the top ten accounts, below.
Do also bear in mind risk factors and access considerations. See foot of page.
We have a new loan offering on the Money&Co. site, from webuyanhome.com. This is a three-year, property-backed loan, rated A+. It offers a fixed-rate yield of 8 per cent, gross. That will translate into 7 per cent, net of our fee. If you decide to lend the full £20,000 via an Innovative Finance ISA... see below for the process and the way the figures play out.
The ISA allowance for 2017/18 is £20,000 per person. If you do not have a Money&Co. ISA, please consider opening one. It takes a few minutes to fill in the application form online. If you hold loans in an ISA wrapper, you will receive the interest completely tax-free. Money&Co.'s registered lenders have achieved an average return of over 7 per cent (net of our one per cent fee) in over three and a half years. That translates into a tax-free income of over £1,400 per annum for those taking advantage of the full allowance.
Over the next few weeks, we expect to see a big influx of new money to lend ahead of the end of the tax year and there will be a number of loan offers posted on the site.
A Process Guide To Innovative Finance ISA Investment
Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here's our guide to the process:
The ISA allowance for 2018/19 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We're assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying - buying a spread of loans. To do this, you can go into the "loans for sale" market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment.We write regularly about these three key factors. Here's an earlier article on security, access and yield.
It's relatively easy to logon to our site and register to become a lender. But if that's all too new-fangled, you can call us on 020 3143 4004 or write to Money&Co., 58 Glentham Road, London SW13 9JJ. We'll then send you an ISA Brochure, and ISA Transfer Authority form (if you want to transfer monies from a Cash ISA) and a Freepost envelope. Then it's just a question of following your nose to get that income...