Only two peer-to-peer lending platforms out of 94 are currently able of offer the new Innovative Finance ISA following its launch this week, as rigorous checks by the regulator have held up the approval process.
It was initially anticipated by the Government that the Innovative Finance ISA (IFISA) market would be up-and-running from 6 April.
However, it is now understood that it will be months before some major peer-to-peer lenders such as Zopa and Ratesetter will get approval to launch their products.
Indeed, Zopa has confirmed to MoneySavingExpert.com that it submitted its application to the Financial Conduct Authority (FCA) to gain approval in September, but expects it will be another few months before it's able to offer an IFISA. Ratesetter has had interim permission to launch an IFISA since April 2014 and submitted its application to the FCA in October last year.
The introduction of the IFISA will allow you to lend up to an annual allowance of £15,240 to other individuals over a peer-to-peer platform within an ISA wrapper, so interest on that portion of savings will be tax-free.
All companies offering the IFISA must be registered with the FCA and HM Revenue & Customs (HMRC).
In total, 94 peer-to-peer platforms have sought approval from the FCA to offer an IFISA, although as it stands only eight requests have been granted.
Of those just two platforms Crowdstacker and Crowd2Fund have been given the all clear by HMRC to provide the IFISA, which can be applied for via the companies' websites.
The other six platforms granted FCA-approval GO2 Partners, Funding Tree, Formax Credit UK, Resolution Compliance, Clasp Investment and EdAid must now seek approval from HMRC before launching their IFISA offerings.
Meanwhile, peer-to-peer platform Abundance, which didn't need to seek FCA-approval to launch an IFISA because it is already registered, is also offering customers the opportunity to place their money in an IFISA, although the funds won't be invested until October.
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What's causing the delay in other platforms launching the IFISA?
The FCA says it takes about a year for most peer-to-peer platforms to complete the approval process so the launch of IFISA products from other firms will depend on when individual platforms started their approval process.
The time it takes for an application to be given the go-ahead will also depend on the complexity of the business and the firm's compliance with regulatory requirements.
An FCA spokesperson told MoneySavingExpert.com that applications from firms wishing to be fully authorised must meet "rigorous statutory standards".
A spokesperson for the Treasury added that it is important that firms are required to meet such rigorous standards before they start offering IFISAs "to protect consumers".
Should I open an IFISA now?
Despite the fact there are currently only three products, the number of IFISAs available to savers will increase over the next year as more companies are given approval by the FCA and HMRC.
A number of peer-to-peer platforms have information on their websites outlining the IFISA they will be offering once they have gained approval so it is also worth looking at these before deciding whether you want to invest straightaway.
So how does the IFISA work?
An IFISA is similar to crowdfunding, in the sense there are no financial middlemen (such as banks) between the lender and the borrower. As a result all of the interest paid on the loan as well as the original capital goes directly to the lender, with the platform taking a small fee.
Unlike cash ISAs, an IFISA has an element of risk attached to it. Because the money you put into the ISA is then lent directly to individual borrowers or companies, your capital isn't guaranteed if your investments don't thrive.
Originally announced in Chancellor George Osborne's Summer Budget last year, the IFISA is subject to the same rules as all other ISAs, such as their maximum tax-free allowance of £15,240 a year (which will increase to £20,000 next April).