Advisers have warned that Government plans for Big Society Isas appear to be a high-risk investment strategy that is unlikely to be suitable for retail clients.
The social Isas are part of a wider strategy under the Big Society Bank which aims to develop the social investment market to give charities and social enterprises access to new funding.
Launching the strategy this week, cabinet minister Francis Maude said: “We want to make sure there are good opportunities for everyday savers to take part in social investment.
“It is unthinkable for businesses to grow and thrive without capital finance but this has too often been the reality for charities and social enterprises.”
Hargreaves Lansdown head of research Mark Dampier says: “It is typically fluffy. I am not quite sure what a community project is but they are likely to be small, illiquid, riskier and not on the stock exchange. How can advisers sell that to investors?”
Skerritt Consultants head of investments Andrew Merricks says: “With the near paranoia surrounding correct risk assessment of clients and what they invest in, to tie community projects in with people’s long-term savings does seem difficult.”
The Big Society Bank will be funded by £400m from dormant bank accounts as well as an additional £200m from the UK’s biggest banks, ann-ounced last week as part of Project Merlin.
The BSB will also look at social pension funds and a social stock exchange which will allow people to buy stakes in projects bidding for contracts to provide public services.
Details are still being negotiated and will be finalised later this year but the bank will be able to use its balance sheet to co-invest, underwrite or guarantee investments.