There has been a lot of recent news around the collapse of London Capital & Finance (LC&F). The company offered a mini bond - which was NOT a cash savings product, but was often advertised as a best account choice for those searching the web for a cash ISA.
The problem is that there are some so-called comparison sites that list a confusing mixture of ISAs – some of which may be cash ISAs, others which may be innovative finance ISAs (Peer-to-Peer lending) and others that are investment ISAs.
But they all have similar-sounding names, so you’d be entirely forgiven for being tempted into an ISA that turns out to be something that you were not quite expecting.
We carried out some research to try to highlight some of the potential pitfalls.
Last week we entered “compare top cash ISAs” into a search engine and the list of results was enlightening.
At the top, there was an Ad that stated;
Transfer your Cash ISA | Target Rate 6% | Up to 3% Cashback
Well, whilst you can transfer your cash ISA, if you transfer to the LendingCrowd.com - which is what this site was - you will not be switching to a cash ISA but rather a Peer-to-Peer ISA – officially known as an innovative finance ISA (IFISA). And many people may not realise the difference.
We can’t comment on the robustness of any innovative finance ISAs - but the simple fact is that these are NOT cash ISAs and therefore your cash is not covered by the Financial Services Compensation Scheme (FSCS). The very fact that the website states "Target Rate 6%" indicates that you might not get that rate – and as mentioned before, your capital isn’t protected.
Another top suggestion offered;
Compare Top 10 ISA Rates | You Can Get 7% Annual Interest
That took us to best-isa-rates.com – a page that doesn’t include a single cash ISA, although it does state on the page that the products are innovative finance ISAs.
It presumably was able to occupy this lofty position in the results because it did include the words ‘compare’ and ‘ISA’ but, crucially, what was missing was the vital word – ‘cash’.
Interestingly, and possibly due to the aforementioned high-profile collapse of LC&F, there does appear to have been an improvement to the wording on some of these sites. From what we can see, they are no longer comparing apples with oranges and make it clearer that you are looking at IFISAs and that your capital could be at risk.
However, it’s important to remain vigilant, as standards could well slip again.
The bottom line is that if you see a rate that is higher than anything you can find on our best buy tables, then be warned that this is unlikely to be a standard cash ISA.
Our best buy tables are whole of market and completely uncompromised. And because the cash ISA market can be hard to navigate, as more and more options are added, we split our tables, so that you can compare like for like.
Take a look at our tables today.
>> Junior ISAs
If you need any further help, do not hesitate to get in touch with one of our savings experts on 0800 011 9705.
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