Back to Zopa Blog

British savers stuck between a rock and a hard place, but are they missing the trick in the middle?

  • 67% of Brits are concerned about the currently volatility of the stock market 
  • Poor returns on traditional savings products continue to disappoint savers with the popularity of the Cash ISA falling to an 18-year low 
  • Middle risk investments look increasingly attractive 
  • But awareness of alternatives remain low, with 77% having not heard of the IFISA* 

Savers are being caught between a rock and a hard place, seemingly trapped between choosing to invest in the increasingly risky stock market, and the low rates offered by traditional savings products, according to Zopa, the Feelgood Money Company.

Zopa’s latest research, released to coincide with ISA season, has revealed people are growing concerned about the stock market, with 67% of Brits saying that the current volatility is putting them off investing. Over half (55%) said it would be unlikely that they would consider a stocks and shares ISA as a viable option for them in 2019. 

While stock market volatility and economic uncertainty normally drives people to seek sanctuary in cash, bonds and other savings accounts, Zopa’s survey found that people were putting the brakes on saving, with less than 1 in 3 Brits expecting to save more in 2019 than last year. 

Savers have faced more than a decade of poor returns, with many growing tired of the poor rates offered by providers. Old favourite homes for savings like Cash ISAs, once seen as the safe option, saw a decline in adoption with the number of Adult ISAs subscribed to falling from 11.1million in 2016-2017 to 10.8 million in 2017-18 according to the latest HMRC figures**, as interest rates stagnate and fail to deliver good returns – with some even delivering negative returns after inflation. 

Britons said that the main barriers to saving more money this year were the increased cost of living (35%), uncertainty caused by Brexit (21%), high inflation (14%), and low returns from savings (14%). 

The trick in the middle – IFISA emerges as better blend of risk and return 

With cash ISAs stalling and investors concerned about the stock market, the time has now come for people to actively look for the option in the middle – the Innovative Finance ISA (IFISA). 

This April marks the third anniversary of the launch of the IFISA as one of the latest additions to the ISA stable. However, awareness of the IFISA remains low, with 77% of British savers having not heard it. 

Offering consumers the chance to invest some or all of their £20,000 ISA allowance in peer-to-peer loans – with the returns protected from the taxman – the IFISA holds the promise of tax efficient, stock-market-beating returns with lower volatility. 

Andrew Lawson, Zopa’s Chief Product Officer, said: “2019 is going to be yet another challenging year for savers and investors. Our research shows that people continue to be disappointed by traditional financial products like the Cash ISA or investing via the stock market. 

“The IFISA stands as the perfect middle ground, offering a great alternative for people who want higher returns than cash ISAs, but not the volatility of stocks and shares. 

“Peer-to-peer lending can be incredibly effective way to diversify an investment portfolio. People looking to invest need to know what assets they are investing and the related risks – personal loans in particular are reasonably stable and predictable.”  

The Zopa IFISA is nestled in the middle, offers a target return of 4.5% in ISA Core, and 5.2% in ISA Plus, the product delivers a healthy balance for customers who want to see a good return without investing in a highly volatile product. 

Zopa has been an award-winning peer-to-peer lender since 2005. Since gaining its bank licence with restrictions in December 2018, Zopa will now bring a wider suite of financial products with the aim of making people feel good about their money by providing simple, fair products that are easy to manage.

*AltFi 

* *Latest data from HMRC 

All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 2000 adults. Fieldwork was undertaken between 15th – 16th January 2019.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).