There are now three types of Individual Savings Account (ISA) – the Cash ISA, the Stocks and Shares ISA and the Innovative Finance ISA. The Innovative Finance ISA (IFISA) allows you to lend money to UK small and medium-sized companies and get the interest received completely free of tax.
Money&Co. is a P2P lending platform. It is offering an IFISA, which will only invest in asset-backed loans. Bramdean Asset Management LLP (Bramdean), which is an FCA-regulated asset management company, is the ISA manager. Loans held in the Money&Co. Portfolio Innovative Finance ISA typically provide a fixed return of 7% per annum after all charges and investors receive this completely tax-free.
These are loans where Money&Co. has a charge on behalf of its lenders over an asset, usually a property. Money&Co. might have a first or second charge over the underlying property. In either case, Money&Co. will ensure that there is sufficient headroom to allow for any financial shocks and that it will be able to get money back for its lenders if the borrower is in default. Nonetheless, lenders must understand that their capital is at risk.
Your loans will not be covered by the FSCS as P2P loans are specifically excluded from the part of the scheme that covers deposits made with banks, building societies and credit unions. However, as an FCA-regulated investment firm, Bramdean is covered by the FSCS and so, as a client of Bramdean, you will be protected. The maximum amount of compensation that an investor can get if an investment firm is in default under the FCA/FSCS definition is £50,000.
Our IFISA has flexibility built in so you will be able to withdraw any income and pay it back into your Money&Co. account during the tax year without it being counted as part of your annual ISA allowance.
Loans will typically have a term of 5 years. If you want your money back before the end of the term of a loan or loans, Bramdean will put your loans, loan or part of a loan up for sale in the Money&Co. loan market. In the past, all loans that have been put up for sale have been sold within a few days, but it must be emphasised that there is no guarantee that it will be possible to sell your loans, loan or part of a loan.