Bond trading platform WiseAlpha has launched a High-Yield Corporate Bond Innovative Finance Individual Savings Account (IF ISA).
The new product allows users of the platform, which allows retail traders to directly trade in fractions of corporate bonds, to make tax-free gains on their investments in high-yield bonds.
Like standard ISAs, IF ISAs allow savers to put away up to £20,000 in investments in each tax year, and pay no tax on the interest.
WiseAlpha touted the fractional corporate bonds sold through its platform as offering the potential for higher yields than the interest from savings accounts on UK government bonds (gilts), ranging from 5% to 12% annually.
It was previously difficult for retail investors to directly trade corporate bonds, given minimum trade sizes of £100,000 and paperwork.
However, there are a large number of longstanding bond funds accessible to retail investors through brokers which invest in corporate debt.
For those without a strong understanding of the bond market, such funds – typically managed by experienced professionals – may be a safer place to put their money.
WiseAlpha CEO Rezaah Ahmad said: “This new ISA is a leap forward in making corporate bonds accessible to all investors, big or small. For too long, this market has been restricted to institutions.
“By democratising access, we are giving everyday investors the opportunity to earn higher, tax-free returns and diversify their portfolios with high-quality corporate bonds.”
WiseAlpha charges four tiers of service fees, depending on how much users invest in corporate bonds through the platform.
There is a 1% annual fee on investments up to £20,000 and then a 0.75% service fee on amounts between £20,000 and £50,000. Amounts between £50,000 and £100,000 are charged 0.5% per year, while amounts above £100,000 are charged 0.25%.
Gilts bought through the platform are charged a separate standard annual service fee of 0.2%.
Points in favour of WiseAlpha that The Good Money Guide has noted previously are its good offering of educational materials, as well as extensive access to high-yield bonds.
However, any investments made through the platform are not protected by the Financial Services Compensation Scheme, which guarantees bank account deposits up to £85,000.
Cash ISAs, which currently offer competitive interest rates, are typically covered by this guarantee, meaning they have more protection in case the provider fails than the new WiseAlpha High-Yield corporate bond ISA.
Robin has more than six years of experience as a financial journalist, most of which were spent at Citywire, and covers the latest developments in the investing, trading and currency transfer space. Outside of work, he enjoys reading literature and philosophy and playing the piano.
You can contact Robin at robin@goodmoneyguide.com
