Here’s a question for you. Is the Financial Conduct Authority (FCA) unintentionally offering us investment advice?
Consider the proposed new limit on investor exposure to peer-to-peer (P2P) assets. This forms part of a new, sharper focus on the P2P sector, following a number of problems with unregulated investments (completely irrelevant, but linked in some minds) and the lamentable failure of the P2P platform, Lendy.
Here’s how P2P Finance News reports the news of the proposed limit.
WHEN the Financial Conduct Authority (FCA) rolled out a new raft of rules for the peer-to-peer lending sector, there was one requirement which received decidedly mixed reviews. In an effort to promote diversification and risk awareness, the regulator announced plans to limit everday investors to investing no more than 10 per cent of their portfolio in P2P.
This announcement was met with concern that the 10 per cent rule could discourage new investors from considering alternative finance. However, opinions are now shifting as P2P lenders start to realise the potential benefits of the FCA’s soon-to-be imposed limit.
Loan Latest And IFISA Process Guide
That figure is the result of over £17 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.