Savers Get a Boost, Of Sorts – But Great Savings Robbery Continues
Savers are still suffering in the UK. Retail price inflation is currently 1.4 per cent. Meanwhile, this news nugget, as carried by our friends at Finextra is as close as savers have got to good news after many years of such accounts underperforming inflation. This rate is relatively good…
Marcus by Goldman Sachs has re-opened its savings account to new UK investors, paying a market-leading 0.5% on deposits.
The mobile-only account was closed to new customer in June last year after a surge in deposits during the Coronavirus pandemic.
The influx of savers had pushed the business close to its regulatory limits, forcing the temporary suspension. British ring-fencing rules currently restrict the sums held on deposit to £25 billion.
At the time, the account had attracted over 500,000 customers and more than £21 billion had been deposited.
In January, Goldman Sachs selected card issuing platform Marqeta to help deliver its first digital current accounts, which will launch later this year. The giant Wall Street bank is set to launch a range of new features in the coming months which will transform Marcus from an online savings and loans account to a full-suite retail banking provider.
Historical Performance And IFISA Process Guide
- Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee).
That figure is the result of over £20 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.
- Money&Co. has been lending for over 5 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.
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:
- Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
- Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
- Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.
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.