News Article

Bank Lending

ISA wrapper to put P2P on the map for investors close to retirement age

By CreditMan Monday, January 11, 2016

One in four investors aged over 55 will consider moving money onto peer-to-peer (P2P) lending platforms once the new innovative finance ISA launches in April, according to research from ThinCats, the UK’s largest secured P2P lender for SMEs.

Currently, just 4.5 per cent of investors in this age group use P2P platforms to bypass the banks and lend directly to individuals and businesses. However the new tax wrapper is expected to introduce the asset class to five times this number, as investors wake up to the anticipated tax benefits.

Under the new rules, P2P loans will be included in a brand new ISA wrapper, the Innovative Finance ISA, which will allow lenders to benefit from the extended £15,240 tax-free allowance set out by the Chancellor at last year’s Summer Budget.

The main hesitation for those aged over 55 has been the pressure to preserve capital, with half (47%) worried about the risk of losing money, and 32% are concerned that the sector is still too young an unproven. However the introduction of the ISA is set to radically change this perception in those over 55, with 25% keen to explore the option come April and half (49%) as yet undecided.

Kevin Caley, Chairman and Founder of ThinCats, said: “ISAs are a tax efficient investment option for savers in the UK, so much so that over two thirds of those in later life are saving into one. Their attraction to the older generation rests on the tax benefits, especially for higher earners, but also with the trust and credibility that the tax wrapper affords.

“The new Innovative Finance ISA is set to bring peer to peer lending into this mainstream investment fold, and, with it, a groundswell of mature investors are expected to follow suit. The stage is set for a transformation in the fast growing sector, especially if those later in life decide to capitalise on P2P’s traditionally high interest rates which are so well suited to regular retirement income.”