The scandal surrounding London Capital & Finance (LCF) deepens. Although the products involved were minibonds – very different from the asset-backed and secured loans offered here – the new line of attack is directed at the financial safety net that is the Financial Services Compensation Scheme. Interesting times.
Investors fighting for greater compensation following the collapse of London Capital & Finance have been given the green light for their judicial review of the Financial Services Compensation Scheme.
The bondholders launched the review in March this year but have now received the go ahead for the case to be heard in court after an attempt to have the case dismissed by the lifeboat body was refused.
The judicial review comes as bondholders fight for greater compensation from the FSCS, an issue of much debate over the past year with mini-bonds falling outside the scheme as unregulated investments.
The claimants in the case are hoping to see the compensation decision made by the FSCS quashed and the eligibility for investors broadened as a result of the review.
The lifeboat body has already paid millions in compensation to those London Capital & Finance investors it believes received misleading advice from the scandal-embroiled mini-bond provider.
Last month the FSCS revealed it had paid more than £20m in compensation to bondholders and issued 1,295 decisions after increasing the size of its team working on the case by almost 80 per cent.
The FSCS levy to be shouldered by advisers this year increased by £16m to £229m predominantly as a result of the scandal.
Historical Performance And IFISA Process Guide
That figure is the result of over £23 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.