The convergence between mainstream finance and the alternative sector is a dynamic process. The mainstream has thrown a lot of money – often with painful consequences – at alternatives. On the other hand, entities such as challenger FinTech banks are entering the savings market.
While platform lending is not directly comparable with savings accounts, the returns, once investors have assessed and understood the risks that come with lending, are considerably better (see below – Risk, Access, Yield).
“Revolut has entered the UK savings market, an increasingly competitive space for fintechs, in partnership with Flagstone and offering an easy-access savings account with a “market-leading” interest rate of 1.35 per cent.
With this account, Revolut says aims to tackle the consumer loyalty trap. The new feature, which is FSCS protected up to £85,000 through Paragon Bank, is available to its metal card users, whose sole tax residency is in the UK, who pay £12.99 per month for a host of premium features.
Revolut Premium and Standard customers in the UK will be able to access Savings Vaults at a lower rate in the coming months. Revolut will be rolling out Savings Vaults to other European markets in the near future.
Only limited deposits will be accepted at the 1.35 per cent AER interest rate. After the limit is reached, any new deposits will receive a lesser rate although Revolut did not specify the specific amount.”
Yes You Can, rated B, for £30,000 with an 11 per cent fixed yield, is currently 21 per cent subscribed. More loan offerings will land on site soon.
Historical Performance And IFISA Process Guide
That figure is the result of over £19 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.