The fallout from the failure of the Lendy peer-to-peer (P2P) lending platform continues. In the wake of this failure, the Financial Conduct Authority (FCA) came in for a lot of criticism. That criticism can only have been a catalytic factor in persuading the FCA to take a hard look at the P2P sector.
As a P2P platform with conservative risk-analysis models Money&Co. welcomes these moves. We have an annualised bad-debt rate of just 0.04 percent over five years, while lenders have achieved average gross returns of over eight per cent, before our one per cent fee. As we constantly repeat: there’s no profit without risk, and lenders must understand risk before committing capital.
With that in mind, the FCA will soon make it mandatory for all peer-to-peer platforms to introduce an “appropriateness test” for new investors, according to P2P Finance News.
We’ll be writing more on this in News and Blogs later.
Loan Latest And IFISA Process Guide
That figure is the result of over £17 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.