The convergence between the “alternative” finance and the mainstream continues apace. This snippet of product news, brought to us by our friends at Finextra, is indicative of the general theme.
Starling Bank has released a new feature that enables customers to make specific recurring bill payments from an alloted ‘Saving Space’, separate from their main account.
To get started with the new Bills Manager feature, customers go to their Savings Space, tap ‘Manage Space’, then ‘Pay bills from this Space’. They can then choose which Direct Debits or standing orders they would like to pay from each Space.
Customers receive a notification when their bills have been paid and can view the transactions by going into the Space and clicking “View transaction history”. If there are insufficient funds in their Bills Manager Space to make a scheduled payment, Starling will send the customer three notifications the day before the payment is due and twice on the payment due date. If the funds are still missing, the bill will not be paid.
Historical Performance And IFISA Process Guide
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.
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 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.