With April’s at-retirement reforms at hand, RateSetter, the UK’s largest P2P platform, is planning to launch into the retirement space with two self-invested pension providers (SIPPs), according to a recent story in the Financial Times. The news comes on the wave of January’s update that RateSetter was nearing a deal with two providers, with two more in the works.
According to FT, Ceri Williams, business development manager at RateSetter,
told FTAdviser that while non-disclosure agreements meant he could not say who the firms were, they are “well known” businesses. He did say one is a wealth manager with a Sipp trustee business attached.
SIPPs are one type of UK government-approved personal pension schemes, which allows each person to make their own investment decisions from the full range of investments approved by HM Revenue and Customs.
After April’s reforms, peer-to-peer and other alternative income products could become popular with savers. However, a key issue was that funds invested could remain in a pension environment. For example, as Williams noted, it is illegal to lend to connected parties such as family members, business partners or anyone who can inherit from the investment holder’s will. Another hangup was segregating bank accounts.
To overcome the issue of “connected parties,” according to FT, investors were asked to,
provide a list of these people self certifying those they cannot lend to, who will then be removed from their borrower lists without compromising the anonymous basis of the platform.
Williams also noted that “an extra layer of technology has now been developed to allow for transactions to be carried out only between Ratesetter and the Sipp trustee.”
Prior to the pension changes in last year’s budget, P2P lending through SIPPs was hampered by rules requiring providers to hold more capital for alternative investments. This left only small, self-administered schemes. However, the pension changes are now obliging “firms to offer a wider array of income options to clients who are no longer restricted in when or how they access their pension.”
People seeking a “low risk, low volatility, cash proxy” product are likely to be drawn to this product, now that a shift in responsibility has occurred, according to Williams.
Although RateSetter’s launch with two to-be-named SIPPs is not the first P2P Sipp partnership–the honor belongs to lending platform ThinCats and financial portal SippClub–RateSetter’s upcoming launch remains significant. RateSetter is an innovative of several firsts; first globally to launch a monthly access and 1 year product; first globally to be risk rated by FE with a score of just 1 (cash being 0); and first globally to launch a Provision Fund, as a few examples. It has a 100 percent track record, with no lenders having lost any money since the company launched in 2010. RateSetter has also shown an inclination to expand outside the U.K., recently launching in Australia as the country’s first and only company to provide peer-to-peer lending to retail savers and investors.
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