Education is key to success for peer-to-peer (P2P) lending platforms, such as Money&Co. We write regularly on the need to educate and inform individual investors as to the benefits and risks of investing in P2P assets, whose yields become even more attractive if held in an Innovative Finance Individual Savings Account (IFISA). Bridging & Commercial runs a report on investors’ attitudes to IFISAs, based on research commissioned by our P2P colleagues, Archover.
The findings were that “61% of respondents acknowledged the prospect of higher returns and better interest rates from an IFIsa. However, over half (57%) claimed that they still didn’t fully understand the service.
Unlike cash Isas, the money invested in an IFIsa is not protected under the Financial Services Compensation Scheme (FSCS).
One key observation was that meeting investors’ expectations and making them feel secure at the same time would require ongoing education. Research showed that nearly half (48%) of savers were nervous about losing their money, so the industry needs to communicate the benefits and safeguards clearly.
Current Offer
Our current offering is a fixed-rate loan of £200,000, yielding 8 per cent, property-backed, with an A+ rating from our credit committee. It’s a pure loan, not a participation stake, but it offers the security of real estate (roughly at 64 per cent loan-to-value). A gross yield of 8 per cent equates to a return of 7 per cent net of our fees. The loan is closing when filled, and is currently 71 per cent bid.
All loans on site are eligible for inclusion in a Money&Co. ISA. If you do not have a Money&Co. ISA yet, please click on the ISA application tab on the Home page and fill in the form. You will need your National Insurance number. The ISA allowance for 2018/19 is £20,000. For full detail on the process, see below.
If you invest via our Innovative Finance Individual Savings Account (ISA – see below for a step-by-step guide to how this works) you will receive the income tax-free.
A Process Guide To Innovative Finance ISA Investment
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 2018/19 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. It’s relatively easy to logon to our site and register to become a lender. But if that’s all too new-fangled, you can call us on 020 3143 4004 or write to Money&Co., 58 Glentham Road, London SW13 9JJ. We’ll then send you an ISA Brochure, and ISA Transfer Authority form (if you want to transfer monies from a Cash ISA) and a Freepost envelope. Then it’s just a question of following your nose to get that income…