Campaign For Peer To Peer (P2P) Loans To Go In Pension Pots

Zopa, a peer to peer lending company, wants to include pension savers as part of their target market. Because of that, Zopa is launching a campaign so the savers can easily put peer to peer loans into their pension pots.

It follows a successful campaign for peer to peer loans to be permitted into Individual Savings Accounts (ISAs) along with stocks and shares, so to benefit as a tax-free loan repayments.

Giles Andrews, Zopa’s Chief Executive, expects that the rules will be changed to allow Self-Invested Personal Pension savers to have more freedom in deciding where to invest their money and may choose to put more of their cash into peer to peer loans.

Subsequently, he wants to convince the giant pension funds to regard investments in the sector as part of their fixed income apportionment – the sum of money they put into bonds and other debt medium.

Presently, P2P loans are categorised as non-standard savings which means that the pension provider must set aside more capital alongside the option of the loan defaulting.

The result is that any SIPP provider who does allow P2P investment will charge the pensioner extra fees to cover the capital cost.

Campaign For Peer To Peer (P2P) Loans To Go In Pension Pots

P2P loan companies market themselves as bank alternatives, where savers can put their cash into a platform that lends it on to pre-vetted individuals or groups of people in an association or company. But in return for the additional interest, savers must also take a greater risk – the borrower may not repay the loan and so it is more likely to lose money.

So far, Andrews has been persuaded by the government’s pension reforms. Retirees are freed from the obligation to buy an annuity. Also, part of the reform is to let them spend or invest their savings freely. As a result, 57 percent of lending on Zopa is funded by savers whose age is 55 and above.

Zopa, a decade-old firm, has now lent out £1 billion to consumers, and is almost doubling in size each year. The firm expects to lend out £550 million this year, before lending out another £1 billion in 2016.

The platform has aided 200,000 customers so far. It believes that its £1 billion in loans makes up approximately one-quarter of the total money loaned out by the British P2P sector.

At Stratosphere peer to peer lending, we have a similar philosophy and vision where we all know eventually, pension pots and other investment vehicles along with the protective wrappers of the likes of FSCS (financial services compensation schemes) will include peer to peer lending and crowdfunding in the future – time will tell!