Risk warning: Don't invest unless you're prepared to lose all the money you invest. Peer-to-peer lending is a high-risk investment and is not covered by the Financial Services Compensation Scheme (FSCS). You are unlikely to be protected if something goes wrong. Take 2 minutes to learn more.

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Risk & safety

Are IFISAs safe?

The honest answer is no, not in the way a cash ISA is. Here is what 'safe' actually means for an Innovative Finance ISA, and what does and doesn't protect your money.

Last reviewed May 2026 · by Gareth Hoyle

Gareth Hoyle

Gareth Hoyle · Founder & Editor

Reviewed May 2026. Independent researcher, not a financial adviser. About Gareth

The short answer

An Innovative Finance ISA is not a savings account, it is an investment. Your capital is at risk, returns are not guaranteed, and the money is not protected by the Financial Services Compensation Scheme (FSCS) against loss. If a borrower fails to repay, you can lose money. So "safe" is the wrong frame. The better question is whether the risk is one you understand and are comfortable taking.

The word "ISA" does not mean "protected"

This trips people up constantly. A cash ISA is a savings account with FSCS deposit protection up to £85,000 per bank. An IFISA is just a tax-free wrapper placed around peer-to-peer loans. The wrapper changes the tax treatment of your returns. It does nothing to reduce the risk of the underlying investment. Same word, completely different risk profile.

What can help reduce risk

Some features genuinely lower (but never remove) the chance of loss:

  • Security. Many platforms lend against property with a legal charge, so there is an asset to sell if a borrower defaults. A lower loan-to-value gives more cushion.
  • Diversification. Spreading your money across many loans means one default hurts less. Auto-lend tools do this for you.
  • Provision funds. Some platforms hold a pot to cover some defaults, but these are discretionary, not guaranteed, and can be exhausted in a downturn.

What does not protect you

The FSCS does not compensate you if a borrower defaults or if the value of your loans falls. Security can take time to realise and may not cover the full debt. Provision funds are not insurance. And a target rate is a target, not a promise. We explain the protection question in more detail in our guide to FSCS and peer-to-peer.

So who is it actually for?

An IFISA can make sense for someone who already has cash savings and an emergency fund, understands they could lose money, and wants to diversify a portion of a wider portfolio into higher-risk, higher-target-return lending. It is not a home for money you cannot afford to lose or might need quickly. If you are weighing it against safer options, our IFISA vs cash ISA comparison lays out the trade-off.

Keep reading

FSCS and peer-to-peer

Why P2P loans aren't FSCS-protected, the narrow situations where some protection can apply, and what it means for your money.

If a platform goes bust

Wind-down plans, segregated loans and trustees: what is meant to happen to your money if a P2P platform fails, and the limits of it.

Spotting a risky platform

Warning signs and due-diligence questions to weigh before trusting any P2P platform with your money.

How we keep this honest

peertopeerisa.co.uk is independent. We provide general information and comparison only, not regulated financial advice. Peer-to-peer lending is a high-risk investment: your capital is at risk and your money is not FSCS protected. Some links are affiliate links, which never affect what we write.