What can you do if your IFISA provider shuts down?

Why IFISA providers shutting down and what to do when they shut down?

Scores of peer-to-peer (P2P) lenders have left the market in the last year, due in part to the economic uncertainties around covid and a crackdown by the regulator, but in a climate of dismal interest rates they could be a valuable home for your lockdown savings.

From Zopa to Ratesetter, here we look at why these providers have exited the market, what your options are if you’re looking for an IFISA to transfer money into, and what the best alternatives are.

What’s happening with the P2P market?

The world has changed beyond recognition in the past two years, and global financial markets have taken a real battering in this time. 

The FTSE, Dow Jones Industrial Average, and the Nikkei all experienced dramatic falls back in March 2020 as the pandemic took hold. In 2020, the FTSE dropped 14.3% - its worst fall since the 2008 financial crash.  

Yet since the dark days of the start of lockdown, things have improved and in 2022 life is very slowly starting to get back to normal again. While we’re very much still in the pandemic, there is a light at the end of the tunnel. 

Many firms haven’t survived the turmoil of the past two years, and several P2P companies have exited the market, citing the ongoing upheaval of the pandemic as one of the reasons for doing so. However, other factors have been to blame as well.

The Financial Conduct Authority (FCA) has put this industry under increased pressure in the past few years. It even called the P2P market and IF-ISAs a ‘high-risk investment’ as part of its InvestSmart campaign to help consumers make better investment decisions.

While it’s obviously crucial to recognise the risk with any kind of investing, it’s also important to understand the levels of risk associated with different investments. Investing in cryptocurrencies, for example, may carry more risk than investing in the stock market. 

It’s the se associations among other reasons that have led some companies, many of which held billions of pounds of savers money and had long successful track records of high returns for investors, to leave the market altogether.  

Which companies have stopped offering IFISAs?

A number of companies have either stopped operating altogether or have pulled their P2P arm recently.

Ratesetter was one of the first to make the move, shutting its 45,000 investor accounts in April last year. All of its loans were transferred to Metro Bank on 2 April following on from the bank buying the P2P lender the previous year. 

Then Lending Works announced in December it was exiting the P2P market. Founded in 2014 it was fully acquired by asset manager Intrivia at the end of 2020 . 

It said it was no longer accepting new money from retail investors, and those with money invested in loans would continue to receive repayments until the loans were clear.  

Zopa, arguably one of the biggest players in the market came next, announcing in December it was shutting down its P2P arm. It had 60,000 investors at the time and said its reason for doing so is to concentrate on becoming a bank.   

All Zopa loans were bought at face value, including those in arrears, and investors didn’t face any fees. 

As one of the first P2P companies, launching in 2005, it was granted a full banking licence in June 2020 and now offers a suite of products including personal loans, car finance, and credit cards.

Is an IFISA a safe home for your money in the current economic climate?

If you're looking for a safe home for your money, the safest option is a traditional savings account. While the returns are low, you can take your money out whenever you want - barring any withdrawal penalties - and you won’t lose anything.

However, if it’s a return you’re after, an IFISA is one option where you may secure returns of 9%.

When it comes to safety, most reputable companies should have processes in place to secure your money. This may be holding it in a separate account and having a fund to pay out any money that is lost. If all the checks and balances are in place, an IFISA should be a relatively safe place for your money - but this all depends on what you deem as safe and your own risk level.

You’ll also need to factor in your own finances. An IFISA, for example, isn’t generally somewhere to hold an emergency fund or your retirement savings. But it could be a good home for extra savings you’d like to see grow.

Before you part with your cash make sure you’ve done thorough research into the company in question and always remember that while rare, there is a risk you could lose your money altogether. 

Where can you put your money?

The closure of so many IFISA providers comes at a time of depressingly low interest rates. Savers have few options if they are looking for a return on their cash given that the Bank of England has kept interest rates low since the onset of the pandemic. 

Even with the expected rate rise this week, with inflation at 5.4% unless an interest rate can beat this any savings will still be losing value.

This is why options including investing in an IFISA are attractive. While this is by no way as safe as a traditional cash savings account, and there is a risk money will be lost, it’s important not to overlook the benefits.

At Easymoney, for example, rates from between 3.08% to 8.00% are possible. If you have money to invest, you can transfer it into an Easymoney IFISA and then any returns also become tax free, up to the annual allowance. Please remember you may not get back the full amount you put in. Your capital is at risk if you invest and not protected by the Financial Services Compensation Scheme (FSCS).

You can do this at any time but if you want to take advantage of this year’s tax-free allowance, you’ll need to have transferred money over before April 5.

Invest now at easyMoney.com (Capital at Risk)

All the facts and figures presented are accurate at the time of posting.

easyMoney is not a cash savings account. You may not get back the full amount you put in. Your capital is at risk if you invest. Peer-to-peer investments are eligible for an Innovative Finance ISA which is not a Cash ISA. They are not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated i n property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice.

easyMoney is the trading name of E-money Capital Ltd, a company incorporated in England & Wales. Registered office is 5 Fleet Place, London, England, EC4M 7RD (Company No. 04861007). E-money Capital Ltd is authorised and regulated by the Financial Conduct Authority (FCA) #231680.