What IFISA means for the UK saver?
In a nutshell?
The introduction of the IFISA (Innovative Finance investment Savings Account) changes what "savings" means in the UK. No longer just a means to lock away savings money for a long term, low risk but low return investment the IFISA is very different to the Cash ISA (or CISA) and Stocks & Shares ISA (or S&SISA).
Before 2016, if you wanted to use your savings for anything more complicated than a unit trust or a share fully listed on the stock market – investments in property or lending services for example – you would have got involved either directly and without tax relief, or through complex Portfolio Investment (PI) vehicles. IFISAs change the game completely.
You have far more flexibility and control over your savings. Bonds or investments in loans under IFISAs last between six months and three years. With so many products out there, not least those from CrowdLords, it is up to you what your investment horizon is. Take your money and earnings back and choose how to reinvest them.
ISAs are a savings product. Its in the name. "Individual Savings Account". Little to confuse there, one would have thought.
Wrong. The introduction of the IFISA, "Innovative Finance Investment Savings Account", also known as IF-ISA, has changed what the word "savings" actually means in the UK. And it all revolves around how you manage your money.
According to the Oxford English Dictionaries the definition of the word "savings" is:
"(usually one's savings) The money one has saved, especially through a bank or official scheme."
Another, allied concept might be:
"The money one has put away."
And that has basically been what ISAs have done since the scheme's inception on 6th April 1999 – put money away. Investments in cash with no involvement at all (the Cash ISA or CISA) or in Stocks and Shares with very limited choice as to where and when it is invested (the Stocks & Shares ISA or S&SISA).
The aim was simple: to encourage British citizens to save for the long term by using tax-free status as the incentive.
Before 2016, if you wanted to use your savings for anything more complicated or profitable than a unit trust or a share fully listed on the stock market – investments in other areas that could offer higher returns like property development projects or lending services for example – you would have got involved either directly and without tax relief, or through complex Portfolio Investment (PI) vehicles – and with the complex tax affairs that go with them.
Cash ISAs offer small, long term, low risk earnings without management. Stocks & Shares ISAs allow slightly higher risk returns with limited choice of stock or share type and no management – a typical fund lifespan is five years.
IFISAs change the game completely. You have far more flexibility and control over your savings. Bonds or investments in loans under IFISAs typically last between six months and three years. With so many products out there; not least those from CrowdLords, see here; it is up to you what your investment horizon is. Simply take your money and earnings back and choose how to reinvest them.
You still must keep your savings money in the overall ISA scheme if you are to keep it tax free. Reinvestment ensures this, and you can do that ad infinitum. If you transfer savings currently held in a Cash ISA at a 1.5% or 2% return a year, you can invest that money tax free across a number of IFISA investments in a number of different types of project with a number of different lifespans. As with all other investment's strategies, diversification is key. See here to understand how best to reduce IFISA risk. It's also important to note that only Cash ISA's are covered by the FSCS. If that is important to you, then you should not transfer from Cash ISAa to other ISAs.
What all of this means is that the risk attached to your savings can match your personal risk-tolerance much more closely. Because the terms are shorter, the options are wider, and you must sell to reinvest – if your life changes dramatically, so to can your IFISA investments. Six to 18-month bonds and loans are standard, see ours here. That said, if you want to invest in much longer – up to five years or more – in high risk lending, there are products for that too. CrowdLords' property development bonds and loans can be as long as five years.
If you are confident with your money, aware of the risks, but ready to change the way you save, choose CrowdLords IFISAs today.
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