Is peer-2-peer lending set to become eligible for Isas?

Is peer-2-peer lending set to become eligible for Isas?

Rumours are circulating the government will announce that peer-to-peer (P2P) lending products will be eligible for inclusion in an Individual Savings Account (Isa) from April 2014.

The Financial Conduct Authority is set to take regulatory responsibility for the P2P sector in April - a move that will legitimise products that are already used by hundreds of thousands of people in the UK.

P2P websites pair savers with borrowers, acting like middle-men in that they offer a place for the two groups to come together and agree lending arrangements.

This means savers are in effect 'lenders', lending their own money (in the shape of a deposit) to those who wish to borrow; and getting a return on their money from the loan rate charged to borrowers (this loan rate is cheaper than the rate offered to borrowers by high street banks and building societies - otherwise borrowers would have no need to visit a P2P lender in the first place).

But the sector remains unregulated until April 2014, meaning savers are not entitled to compensation should things go wrong (although leaders such as Zopa and RateSetter operate funds that will kick in to compensate individual lenders in the event of any defaults).

If the government does announce in its Autumn Statement on 5 December that P2P will be eligible within an Isa, it would be a huge boost to the popularity of P2P products.

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Daniel Rajkumar, managing director of, said: "This marks a seismic shift in the savings industry and would be an excellent move to encourage a new wave of P2P investors who can help create a thriving SME sector in the UK. As a result, both borrowers and investors benefit.

"Given the government's move to focus attention on business lending, this complementary strategy represents long-term support for the industry. With this announcement and impending regulation next year, we anticipate participation levels to soar through increased media coverage and independent financial advisers recommending the product."

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