Autumn Statement: IFISA remit extended
Chancellor Jeremy Hunt has extended the remit of the Innovative Finance ISA (IFISA) to include open-ended property funds and long-term asset funds.
In his Autumn Statement, Hunt made a series of changes to ISA products designed to make it easier for investors to access the tax-free scheme.
From April 2024, the government will allow long-term asset funds to be held within an IFISA wrapper.
Open-ended property funds with extended notice periods will also be made IFISA-eligible from the same date.
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The government will also remove the one-ISA per year restriction that had previously limited IFISA investors from diversifying their money across multiple IFISA-eligible portfolios.
Furthermore, investors will no longer have to reapply for an existing ISA annually.
The ISA overhaul has been welcomed by industry figures.
“These changes align with TISA’s longstanding commitment to empowering individuals to achieve their financial goals efficiently,” said Lisa Laybourn, director of technical policy and risk at TISA.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said that the addition of long-term asset funds could open alternative revenue returns for investors while increasing the flow of funding into new projects.
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“Long-term asset funds offer sophisticated investment opportunities in areas like private equity, infrastructure and real estate,” Streeter said.
“These have previously been hard to reach for modern workplace pensions and retail investors. Until now they couldn’t be held within an ISA because ISA assets need to have the ability to be sold within 30 days.
“We would expect groups of retail investors also to be interested in investing in more long-term projects – particularly if they help to power the green industrial revolution,” she added.
“The key to this is to consider the retail investor’s requirements and perspectives, ensure value, well governed products which deliver good outcomes.‘’
Jonathan Moyes, head of investment research at Wealth Club said that the addition of long-term asset funds to the IFISA remit has the potential to bring world-class private market funds into ISAs.
“The world’s most sophisticated investors, from endowment funds to sovereign wealth funds and family offices have long understood the benefits of investing in private markets as part of a diversified portfolio,” Moyes said.
“With companies staying private for longer, much of the world’s growth and innovation is accruing in private hands. The decision to allow long-term asset funds within an ISA provides investors with the potential to gain exposure to this growth, in a tax efficient manner.
“The move also promises to breathe new life into the ailing IFISA. The inclusion of long-term asset funds should see the wrapper become a more compelling option for wealthy investors.”
There had been concerns within the peer-to-peer lending and crowdfunding sector that the chancellor could use the Autumn Statement to do away with the IFISA altogether. Alternative Credit Investor is aware that P2P industry stakeholders had been in discussions with the Treasury in the run up to the Autumn Statement.
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