A Climate For Change
8 January 19
8 January 19
Traditionally, as a first step, many people turn to investing through an ISA – Individual Savings Accounts – which provide a tax-free haven for up to £20,000 of new savings and investments per annum. There are 4 types of ISAs available today, but the two most popular choices continue to be cash ISAs and stocks and shares ISAs.
Today, according to MoneySavingExpert, the best instant access cash ISA rate is 1.45% and the highest one-year fixed rate is 1.66%. This means that savers are losing money in the current inflationary climate as their funds are depreciating in real terms.
By contrast, a potential return of, say, 4-8% on a stocks and shares ISA may look appealing, but if we take a closer look at the state of the markets over the course of 2018 it’s clear that this was a particularly volatile and unpredictable year for stock markets.
The table above demonstrates the returns a stocks and shares ISA investment of £100,000 could have achieved over 2018 compared to a variety of benchmarks. These include Britain’s leading index, the FTSE 100, which suffered its worst performance since 2008 and the ARC private client indices estimates for 2018, which show the expected annual return generated by investment managers on behalf of their clients for a range of investment mandates. There is of course every chance that 2019 will see an equity market upturn, but the long list of economic, political and market instabilities create an uncertain outlook for those considering stocks and shares ISAs over a short investment timeframe.
A more recent alternative to solving the investors’ conundrum is to consider an Innovative Finance ISA (IFISA). IFISAs enable investors to participate in asset classes such as corporate debentures and crowd bonds. They should be viewed as investments rather than savings reflecting that the returns offered by many IFISA providers are comfortably ahead of inflation.
One example of such an IFISA offering is Triple Point’s Income Service, which generates an attractive, fixed return to investors by providing funding through a single holding to thousands of carefully-vetted UK businesses.
The Income Service is engineered to generate a predictable income stream which is uncorrelated to traditional listed equity and bond markets. It is designed to provide a fixed interest rate over a fixed holding period from 1-5 years, with interest being paid either monthly or at maturity.
Therefore, if we were to take the previous scenario, after 12 months, an investment of £100,000 would produce an annual interest gain of £5,380, which if held in an ISA would be tax free.
Ultimately, well-chosen IFISAs, can be a smart alternative to stocks and shares ISAs when it comes to protecting your savings from inflation, providing access to an asset class uncorrelated to stock markets and giving diversification to investor’s existing equity and cash holdings.
Risk Warning: As with all investments, the Triple Point Income Service places capital at risk. Investor’s may not get back the full amount invested, and interest is not guaranteed. We do not provide investment or tax advice. Tax treatment will depend on your individual circumstances and may be subject to change in the future. Please speak to a financial adviser, who can guide you if you are in any doubt. Investors should only subscribe to the Triple Point Income Service on the basis of the information and terms set out in the Information Memorandum and Investor Agreement.
Triple Point Investment Management LLP is authorised and regulated by the Financial Conduct Authority, firm reference number 456597. Triple Point Administration LLP is authorised and regulated by the Financial Conduct Authority, firm reference number 618187.