ISA season: Savings rates versus IFISAs
Investors are continually weighing up their options, especially during ISA season. With interest rates on the rise, it’s worth considering the safety of a savings account, or potentially higher rewards with peer-to-peer lending.
Rates compiled by Money.co.uk savings expert Lucinda O’Brien shows that Santander is currently offering the top rate on cash ISAs. Its 18-month product is paying 4.25 per cent, while its one-year fixed-term cash ISA offers 4.15 per cent. Santander is also offering a £50 voucher if a saver transfers a non-Santander ISA of £10,000 or more to one of its fixed-rate ISAs.
Meanwhile, Tandem is offering a five-year fixed bond at 4.6 per cent, while P2P lender-turned-digital-bank Zopa is offering a 31-day notice savings account at 3.31 per cent.
Read more: ISA season: Most investors want their money used for good
The rates are relatively low compared with some of the Innovative Finance ISAs (IFISAs) on the market.
Abundance Investment, the ethical crowd bonds platform, is advertising returns of up to eight per cent which can be held in its tax wrapper; while Crowd2Fund, a P2P platform which funds British entrepreneurs, offers target returns ranging from eight to 15 per cent.
Read more: ISA season: Where to find the highest IFISA returns
In the P2P property sector, the rewards are among the highest. Shojin Property Partners is offering returns of up to 15 per cent; Proplend is offering up to 12 per cent; while Relendex is advertising a target rate of return of up to 11 per cent.
However, the rising base rate means that some IFISA rates are now less competitive. For example, British Pearl offers returns of up to 4.3 per cent, while Crowdstacker’s target returns range from four to 7.5 per cent.
Read more: Rising base rate poses challenge for P2P firms
A number of platforms have been raising their rates due to rising base rate. Loanpad, which has increased its rates a number of times already over the past year, is increasing them again in April and May.
As of 1 May, its ISA rates will exceed that of the standard accounts, at 4.6 per cent for an ISA classic account and 5.6 per cent for an ISA premium account.
While some of these IFISA rates may be similar to those of the aforementioned cash ISAs, investors may be able to benefit from additional liquidity with their IFISAs. For example, Loanpad’s investment accounts offer daily or 60-day access, although this is dependent on market conditions.
Read more: Why are P2P platforms raising their rates?