根据Plutus Wealth的Thomas Diaper所言，三月预算（明年四月生效）中限制条件的松绑大大提升了退休金产品的感召力。一旦退休，储户就能对基金做出灵活的调整。此外，退休金的税费规定允许那些税率高的人们推迟纳税，直到退休后回到基本税率标准再进行纳税，这意味着退休金将会成为很多储户的首要选择。特别是对于那些想要做出贡献的雇主来说尤其是这样的，Hargreaves Lansdown的Danny Cox如是说。
Peer-to-peer lending can help you to save for retirement
But pensions are still more appropriatefor many savers.
The peer-to-peer lending industry is booming. Figures from the Peer-to-Peer Finance Association showed that over £500m of new money was lent in the first half of 2014, with over 66,000 retail investors offering loans to individuals and small business though online platforms like Zopa. Returns can be attractive, offering the chance for both long-term capital accumulation and regular income.
And with plans in place to allow these investments in the new Isa (Nisa) – the Treasury says it is informally consulting with industry on the details, and will launch a public consultation later this year – many expect peer-to-peer to form an important part of some people’s retirement saving plans.
Some are using peer-to-peer investments for a steady income when in retirement
PENSIONS AND THE NISA
With UK life expectancy increasing, having a large pot of capital for retirement is of growing importance. Prudential found that someone turning 65 this year can expect an average of 20 years in retirement, and would need a pension pot of around £121,000 to receive the £15,800 average expected annual retirement income – a figure that includes the full state pension. With life expectancy likely to keep rising, the requisite pot size will grow. And Prudential’s calculations assume a post-retirement income well below what many would hope for.
The loosening of drawdown restrictions in March’s Budget (coming into force next April) has boosted the appeal of pension products, according to Plutus Wealth’s Thomas Diaper. Savers will have greater flexibility over what to do with funds once they reach retirement. And the tax treatment of pensions, allowing higher rate payers to defer taxation until they are a basic rate payer in retirement, means pensions will still be the first choice for many savers. This is particularly the case for those with employers willing to contribute, says Hargreaves Lansdown’s Danny Cox.
But for others, particularly those unwilling to tie capital up in a pension scheme, Nisas may be a better option. Diaper says that younger savers, for example, will typically be accruing capital for a house deposit, meaning there is little reason to lock funds in a pension scheme. Nisas allow you to withdraw money tax-free at any time.
And by extension, peer-to-peer investments in a Nisa could be a particularly attractive way to save for investors with a higher risk appetite, says Diaper. With typical returns of around 5 per cent (depending on the duration of the loan) for well-established platforms like Zopa, capital growth can be on a par with some equities. And while peer-to-peer investments don’t qualify for the Financial Services Compensation Scheme, which covers up to £85,000 of your cash in the event that a bank or building society goes bust, default rates have been extremely low in recent years – often well below 1 per cent at the leading platforms. Cox points out that established providers have a safeguard fund or insurance to help guard against capital losses.
And even outside the Nisa, many retirees are using peer-to-peer lending for an income stream in retirement. With returns often paid in monthly chunks of capital and interest, some expect this to provide a part-replacement for annuities. Kevin Mountford of MoneySuperMarket.com says that “we are seeing a lot of older people using these platforms. They typically put a small amount in, and then gradually build it up.”
Of course, it’s naive to expect higher returns without more risk than cash, and Cox thinks default rates may increase as base rates begin to rise. But peer-to-peer platforms are building up a strong following, he says, and look set to play a part in many people’s long-term saving plans.
How could peer-to-peer (P2P) lending help you reach your retirement goals? First, it’s a good way to grow capital. According to Zopa calculations, if you lent a £1,000 lump sum initially over its platform, and then added £500 each month, you would end up with a total pot worth £304,390 after 25 years, and just £150,500 would have been your contributions. This assumes a 5.2 per cent annualised return before tax, after a 1 per cent fee, and that you re-invest interest payments. And that capital could provide an attractive income once you retire: on Zopa’s five-year loan rate, £304,390 would return £15,828 before tax each year. The average return to lenders via Zopa is 5 per cent.
George Osborne announced in the 2014 Budget that P2P will soon be eligible to be included in the Isa wrapper, making it free of taxation. And while the lifetime allowance for pensions is £1.25m (any money above that amount is liable for punitive rates of taxation), there is no limit as to how much you can lend via P2P, making it a useful way to supplement other funds.
There are risks. But since 2010, bad debt on Zopa has averaged 0.25 per cent. Further, now with a community of 57,000 active lenders, over £600m has been lent through Zopa. There is also a Safeguard fund, currently holding over £5m, designed to step in and give you back your money, including interest owed, if a borrower falls too far behind on their payments.
To reduce risk further, your money is lent out in small chunks to different borrowers, who also have to pass a series of checks: they must be over 20 years’ old, UK residents for at least three years, must earn at least £12,000 a year, and have a solid credit history. And while you will need to pay a 1 per cent fee to access your capital if it hasn’t yet been paid back by borrowers, you can withdraw money as it is repaid each month.