£781m invested in IFISAs during first year of pandemic

£781m was invested in Innovative Finance ISAs (IFISAs) during the first year of the pandemic, despite months of uncertainty and the temporary closure of several peer-to-peer lending platforms.

£552m of this was actively invested into P2P and crowdfunding loans, while £229m was kept in cash deposit accounts.

Between April 2020 and April 2021, approximately 16,000 new IFISA accounts were opened. According to newly-released data from HMRC, approximately 142,000 IFISAs have now been opened since the tax wrapper was introduced in 2016.

The HMRC data also revealed that Cash ISA deposits declined by £12bn during the 2020/21 financial year, as consumers rejected the historically low savings rates on offer. Some instant-access savings accounts were advertising rates as low as 0.01 per cent during the first year of the pandemic.

Read more: P2P sector smashes milestones in 2022

Meanwhile, investments in stocks and shares ISAs increased by around £10bn during 2020/21, despite pandemic-induced stock market volatility.

Analysts have suggested that more British households felt compelled to invest their money during year one of the pandemic, in an effort to seek out better returns rather than relying on cash deposits.

“In a world of rock-bottom interest rates savers have been searching for better returns by turning to investing,” said Adrian Lowery, financial analyst at Bestinvest.

“After the initial shock of the Covid crash that hit the stock markets from February to April 2020, it seems that savers gathered their nerves.

“In general though, it is risky for investors to try to time the market, and rather it is better practice to buy into investments at regular monthly intervals. This gives you the best chance of riding out volatility, which global markets continue to suffer from given a whole new set of concerns.

“While it is wise to hold some cash savings for emergencies, with inflation now rampant it is unwise to hold too much in cash for long periods of time.”

Earlier this year, exclusive research by Peer2Peer Finance News found that IFISAs outperformed the UK stock market during the four years from 2018 to 2021, with average returns of between 7.8 and nine per cent per annum.

By contrast, the FTSE All-Share returned 18.3 per cent in 2021, -9.8 per cent in 2020, 19.2 per cent in 2019 and -9.5 per cent in 2018.

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