Does Cost Inflation Mean Wage Inflation? One To Watch…
Will the coming avalanche of high costs really affect you? Well, according to trade media outlet Altfi, a pay bump is reasonable to expect.
- We were surprised. Really?
Well, this is how Altfi reports it:
The fintech world took note yesterday after a leading investment bank warned inflation could spiral to above 18 per cent next year.
The gloomy prediction came from investment bank Citi and would mean UK inflation would be at nine times the Bank of England’s target and reach its highest point in more than 40 years.
The last time consumer price inflation was last above 18 per cent was 1976, official figures show.
Amid already spiralling inflation across Europe and the US, several fintechs have been forced to cut staff, citing inflation as a cause.
For example, Robinhood CEO Vlad Tenev cited “record inflation” as a reason the stock trading app was cutting 23 per cent of its staff earlier this month. Likewise, Klarna cited inflation when cutting 10 per cent of its employees in May.
Other fintechs have told AltFi they would be increasing salaries to combat rising inflation, including Berlin-headquartered insurtech INZMO and crowdfunding investment platform Crowdcube.
But it remains to be seen if fintechs en masse will be offering staff a pay bump amid an even worsening economic environment.
- This is certainly one to watch, as we say above, and we’ll be reporting back.
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 £24 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 7 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 2020/21 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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