Digital boutique banks, the kind of entity that one might argue Money&Co. is becoming, are all about agile management and the flexibility to adapt to market conditions. Today, we bring news of one of the leading digital banks, Starling, which is adapting its offering to deal with the much-heralded cost-of-living crisis. While Money&Co., with a range of niche lending and finance products, will never go near this product breadth, we applaud the foresight and, of course, the flexibility of the Starling move.
Starling Bank has upgraded its Spending Insights tool to help people improve their money management skills as the cost of living crisis bites.
Thirty-six new spending categories have been introduced, giving customers instant access to monthly spending data across each category. Starling is also rolling out a search capability that lets customers gain insights on specific categories, vendors and purchases.
Personal and joint current account holders will have access to 53 spending categories in total, with many of the 36 new categories requested directly by customers. ‘DIY’ ‘hobby’ and ‘takeaway’ categories are available to those still holding on to habits formed during the Covid lockdown, while those enjoying post-lockdown freedom can categorise spend to their ‘bucket list’, ‘relationship’ date nights and ‘weddings’.
Other categories have been added for essential spending, including ‘rent’, ‘medical’ and ‘groceries’, with customers given the ability to tag which categories and specific purchases are essential and non-essential.
Loan Offer Latest
A loan offer from Harris & Co., a borrower that operates in the litigation claim sector, is available on site. The loan is risk-rated A by our credit committee. It has a gross yield of eight per cent, for a fixed term of 12 months. The loan offer closes when filled.
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.