Savers' Struggle Against Inflation Continues


News reaches us that just one in five loveMONEY savers is able to keep pace with inflation. According to that platform "it's not hard to see why when you look at the best buy tables".

  • Before pointing out the hugely superior returns achieved by Money&Co. lenders (gross returns over eight per cent – with an annualised bad debt rate of 0.03 per cent, see below), it's very important to stress that our lenders are investors, not savers. Lending, remunerative as it is, carries risk (see warnings in this article, on the site's Home page and in FAQs). Lenders need to acquaint themselves with those capital risks before committing capital.
See one of our many earlier stories on how savers have suffered in recent years (The Great Savings Robbery).

A lot of the attention at the moment is going towards those individuals and families who are worried about making ends meet, and rightly so. Even with the extension of the furlough scheme until October, and the (eventual) launch of the Self Employment Income Support Scheme, there are nonetheless millions of people across the country in a difficult situation, with yet more uncertainty ahead. But there are also millions of households who have squirrelled money away over the years to build some savings, who don't know whether to laugh or cry at the 'returns' currently on offer.

Unbeatable inflation

Since the start of the year, loveMONEY has polled you, the readers, a handful of times on whether your savings are currently beating inflation.Really, this should be the minimum expectation for any engaged saver. If you aren't beating inflation, then the value of the money that you have saved is essentially being eroded over time.And yet less than one in five readers believes their savings are beating inflation.Given the Consumer Prices Index measurement of inflation right now is sat at just 1.5%, you wouldn't think it would be out of the question for most savers to find somewhere to keep their money that pays an inflation-beating rate.

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 £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.
  • Money&Co. has been lending for over 5 years and has facilitated over £23 million - with only 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.

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