NISA and pension income-seekers could find crowdfunded loans the last piece of the pie
Some call it peer-to-peer (P2P) lending. Others prefer to call it person-to-business (P2B). Either way, Money&Co.'s crowdfunding sector is doing well.
As City AM puts it: "The peer-to-peer lending industry is booming. Figures from the Peer-to-Peer Finance Association showed that over £500m of new money was lent in the first half of 2014, with over 66,000 retail investors offering loans to individuals and small business."
"And with plans in place to allow these investments in the new Isa (Nisa) – the Treasury says it is informally consulting with industry on the details, and will launch a public consultation later this year – many expect peer-to-peer to form an important part of some people's retirement saving plans."
It's good to know that City AM shares our excitement about the forthcoming inclusion of crowdfunded loans as eligible assets for New Individual Savings Accounts (NISAs). In a section on pension planning and NISAs, City AM continues: "With UK life expectancy increasing, having a large pot of capital for retirement is of growing importance. Prudential found that someone turning 65 this year can expect an average of 20 years in retirement, and would need a pension pot of around £121,000 to receive the £15,800 average expected annual retirement income – a figure that includes the full state pension. With life expectancy likely to keep rising, the requisite pot size will grow. And Prudential's calculations assume a post-retirement income well below what many would hope for...
"NISAs could be a particularly attractive way to save for investors with a higher risk appetite, says [Plutus Wealth's] Thomas Diaper. With typical returns of around 5 per cent (depending on the duration of the loan) for well-established platforms, capital growth can be on a par with some equities. And while peer-to-peer investments don't qualify for the Financial Services Compensation Scheme, which covers up to £85,000 of your cash in the event that a bank or building society goes bust, default rates have been extremely low in recent years – often well below 1 per cent at the leading platforms.
"Of course, it's naive to expect higher returns without more risk than cash... But peer-to-peer platforms are building up a strong following, he says, and look set to play a part in many people's long-term saving plans."
We couldn't agree more. As previously reported, we're awaiting NISA developments with keen interest, and have more than £5 million of loans waiting to come on site. In the interim, you can register as a lender and buy existing loans offered for sale by other registered lenders in our loan market. But, as we say, you have to register to see what's on offer in this market.