The founder of easyJet has launched a new brand in the personal finance market, offering an Innovative Finance Isa (IF Isa) to investors.
Sir Stelios Haji-Ioannou has opened easyMoney, a peer-to-peer investment brand which is offering an Innovative Finance Isa as its first product.
It has promised to launch more financial products in future, arguing that the UK financial market needs new entrants to stimulate competition.
The easyMoney Innovative Finance Isa is targeting an annual return of 4.05% and will invest cash in property-backed peer-to-peer loans. Customers are not able to choose what properties they invest in, instead any cash will be automatically diversified across many loans to minimise exposure.
Most of these loans will be on residential properties, although some will be on commercial loans for property development. All properties are based in the UK.
This form of investment carries more risk than typical high street savings accounts as loans can default. Cash held in peer-to-peer is not protected by the Financial Services Compensation Scheme and your initial investment is at risk.
Sir Stelios hopes to shake up the financial services industry, as he did the airline market in the 1990s and 2000s. The easyMoney brand will have no branch network and customers will only be able to contact the bank online or over the phone.
“Everyday investors in the UK have gone almost a decade without real interest rates,” he says. “With the easyMoney Innovative Finance Isa, we’re offering something new and taking on the big boys.”
What is an IF Isa?
The IF Isa works in much the same way as a Stocks and Shares Isa; your investment is held within a tax-free wrapper and any growth is not subject to tax.
Investors have a £20,000 Isa allowance for the 2017/18 tax year. This total can also include Cash Isas and Stocks and Shares Isas, although the combined amount invested during the tax year must not exceed the limit.
However, an IF Isa is an investment product, and your deposits are not protected by the Financial Services Compensation Scheme.
For more information on IF Isas read Moneywise’s investigation into the peer-to-peer market.