If the Bank of England’s Monetary Policy Report is right, there’s some £125 billion lying around the back of the UK’s savings sofa. During the pandemic crisis, we’ve stayed in and done little. Those households with income have found themselves with accumulated cash.
We reported here on Goldman Sachs’ attempt to get some of that, with the relaunch of its savings account. Offering well below the current rate of inflation, it’s possible to argue that the mainstream financial institutions are providing poor value to consumers – a phenomenon we’ve been calling The Great Savings Robbery for years now!
UK insurance and pensions house Aviva is moving in to the cash savings market through a tie up with deposit platform Raisin.
The new Aviva Save platform offers the firm’s 15 million customers in the UK a selection of fixed-term savings accounts with competitive rates. Savers can pick and mix offers from a range of banks and manage them all fully digital under one roof on the Aviva Save platform.
The launch follows The Bank of England’s Monetary Policy Report in February outlining that “households have accumulated an excess stock of savings of £125 billion” throughout the pandemic, equating to an average of £5,000 per household.
Historical Performance And IFISA Process Guide
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.
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.