The introduction of peer-to-peer funds within tax-free ISA accounts may be delayed until beyond the next election, according to the sector.
A combination of technical details and a long-winded process to get the measures through Parliament is likely to postpone the move until later in 2015, says the Peer-to-Peer Finance Association (P2PFA).
Peer-to-peer platforms, which allow borrowers and investors to make arrangements independently of banks, have been awaiting details of how their savings products would be included within the tax-free ISA category.
The Treasury has undergone a consultation on the matter, following the announcement by Chancellor George Osborne in March that the P2P environment would be introduced as a tax-free option for suffering savers.
The P2PFA, an industry body, said it was likely that the move would be pushed beyond the next election. But cross-party support for the idea means that its progress is unlikely to be affected by the result.
A Third ISA
The discussions surrounding the integration of peer-to-peer funds within the tax-free ISA bracket have centred upon whether or not these funds should be included within the existing ‘investment’ ISA structure or within a new one.
The sector prefers the idea of a new ISA bracket, especially because the sector is not currently protected by the Financial Services Compensation Scheme, which covers deposits in standard bonds and ISAs.
“Particular features of this market need to be treated differently. There’s no instant liquidity – this isn’t an instant access arrangement,” said P2PFA chairwoman, Christine Farnish.
Secure Savings Video
But the sector is looking forward to the arrangements being put in place. ISAs are a popular option for savers, due to their tax-free status. Savers can place up to £15,000 per year into these accounts, in any combination of cash or stocks and shares.
There have already been major changes to ISAs this year following measures announced in the Budget.
It was hoped that a larger allowance and greater flexibility would boost rates and improve competitiveness within the sector, but banks have largely overlooked the challenge.
Consequently, the P2P industry is confident that the introduction of their products within the ISA bracket would represent a considerable boost to the popularity and growth of the sector.