For all the resilience the UK economy has shown, there is no doubt that this year's ISA season is set against a backdrop of uncertainty. Whatever the pros and cons, Brexit, and a lack of clarity on what our future economic relationship with the EU will look like, has left us at a crossroads.
Can P2P lending bridge the investment gender gap?
There are a number of discrepancies between the two sexes within personal finance in the UK, but one which has been identified as particularly disconcerting of late is the gender gap with respect to investing.
Figures available on the HM Revenue & Customs website better illustrate the extent of the issue. Over a million men have stocks & shares ISAs, while just over 800,000 are held by women. Across all age groups within this criterion, men outnumber women too, with the biggest gap coming in the 25-34 age bracket, where the ratio is nearly 2:1.
What makes these figures all the more significant is the corresponding comparison between the sexes in terms of cash ISAs. Indeed, women have opened more cash ISAs than men – with a near 60:40 ratio in the 45-54 age category alone.
It thus seems safe to infer from this statistic that the issue is very specific to investing, rather than the exclusion of women from personal finance as a whole. Backing up this point were the findings of research by the investment firm Fidelity, who surveyed men and women with cash savings but no investments. Interestingly, some 35 per cent of female respondents said they didn’t feel confident investing, while only 26 per cent of males offered the same response. It was also notable that a greater number of female respondents cited insufficient knowledge of investing and a lack of understanding of the stock market as the main reason for their reticence.
How does peer-to-peer lending compare to stocks and shares?
Peer-to-peer lending (P2P) has many virtues, but perhaps one of its greatest attractions is that it is fundamentally simple and straightforward. Platforms have varying approaches to how returns are earned (and safeguarded), but the common theme among prime UK platforms is that these returns are stable and predictable.
And of course the recent launch of the new Innovative Finance ISA – in addition to inclusion within the Personal Savings Allowance – has ensured P2P lending has become tax efficient, which in turn means that ever more pennies are ending up in the pockets of investors.
We do not shy away from the fact that there are risks involved, and returns (and capital) are not guaranteed – nor covered by the Financial Services Compensation Scheme. But, in addition to putting safeguards in place, regulated platforms are required to communicate these risks very clearly to potential customers, while it is mandatory for members of the Peer-to-Peer Finance Association to display in-depth performance statistics on their website.
A bridge to investment?
Investment of any kind is a very personal decision, and each individual has a different level of risk appetite – regardless of gender. It is thus absolutely vital that anyone who puts their hard-earned money into peer-to-peer lending is comfortable with the levels of risk and return involved, and has a clear idea of how the platform works, and what their investment will entail.
But it should also be borne into mind that the market leader among easy-access cash ISAs pays out just 1.01 per cent at present – and, even then, there are restrictions involved. Given that inflation is currently at 2.7 per cent, and expected to increase for the remainder of 2017, such savings options are, in effect, guaranteed to diminish your money in real terms – despite the fact that they masquerade as ‘guaranteed’.
It underlines the need for alternative ways to grow your money, and peer-to-peer lending is rightly positioned as a midpoint on the risk spectrum between savings and stocks and shares. But it is also well placed to act as a gateway into investment on a broader level, and, given the clear gender gap in this regard, there is surely good reason to believe the P2P sector can play a pivotal role in levelling the playing fields.
The 2019 ISA season is now in full swing, and it's as good a time as any to focus on financial planning - and, within that, looking ahead to your retirement years to ensure financial security.
The Lifetime ISA (LISA), announced in 2016, would prove to be one of George Osborne’s last flagship gestures to UK savers and investors as Chancellor, eventually launching against a backdrop of anti-climax a year later in April 2017.
As the tax year end approaches, the financial services industry readies itself for a flurry of activity. That's in large part because, with just a couple of months to go, the so-called 'ISA season' is upon us.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.