On Wednesday, peer-to-peer lending platform, Crowdstacker, released data that suggested government reforms how British consumers should save and invest.
Crowdstacker offers P2P investment opportunities backed by British businesses that are said to have a good track record or are able to offer security. Crowdstacker assures that each eligible P2P investments have been scrutinised with a high level of due diligence. They believe this is an advantage over competitors within the P2P market as some other providers may only undertake automated credit analysis.
The company reports that top line data suggests the average Brit was already missing out on up to £1000 a year, even before April’s changes came into force, by simply not actively managing their money.
Karteek Patel, CEO of Crowdstacker, stated:
“The hat trick of Government changes which came into force on 6th April 2016 could mean that people need to re-order the relative priority of different savings and investment vehicles.
“The trouble is we can see from our research that people are apathetic about changing their savings and investment habits. For example 1 in 5 have never changed bank, and twice as many have never sought a better pension by changing provider. In fact we’re just not good at active money management with the average Brit only making financial changes once every five years.
“The PSA looks simple at first glance, but we think there is a strong argument to say this should potentially take priority over more popular savings and investment routes favoured by British adults.”
The company also revealed that the PSA allows basic rate taxpayers with money in investments such as savings accounts, unit trusts or P2P loans, to earn up to £1000 interest tax free each year. For a higher rate taxpayer, they can receive up to £500 interest without handing a penny over to the taxman. Government figures suggest that 95% of savers will benefit from this change. Secondly, the £1 million lifetime pension allowance, which came into force in April, means that people could easily breach the limit and fall foul of the 55 per cent tax rate when the time comes to draw it down. And lastly, the Innovative Finance ISA enables investors to wrap their peer to peer investments, up to an annual value of £15,240, in a tax-free ISA wrapper.
Patel went on to add:
“What we’re experiencing with these seemingly subtle alterations to taxation on savings, actually cumulatively adds up to pretty fundamental changes meaning people should be taking some time over the next few weeks to re-evaluate where they put their money and in what order and ratios they allocate it.
“Savers and investors utilising these options, to date, have probably been tax efficient and maximised their returns. But now these reforms have come into force, that could all change. The shake-up means people really ought to revisit their savings and investments to check that they are not missing out on value elsewhere.
“There’s been a lot of coverage about the new innovative finance ISA, and obviously this is great for our industry. The Personal Savings Allowance is being talked about more. And the media is full of advice about the pensions changes. But, we would encourage people to take a holistic view about how these changes affect their personal circumstances as a whole.”
