The first peer-to-peer lending scheme to allow investments through a SIPP has now been revealed.
Personal pension owners can now invest in peer-to-peer lending through a newly formed partnership between ThinCats, an unnamed pension provider and the financial portal SIPPclub. Last year, changes to the SIPP (self-invested personal pension) rules made if tricky for providers to allow clients to include p2p lending within their portfolio. The groundbreaking union between ThinCats and SIPPclub has overcome these issues – allowing sophisticated pension savers to access ThinCats loans that are capable of producing returns in the region of 9%.
Kevin Caley, Managing Director of ThinCats, explained the significance of the new initiative:
“Recent moves by government to democratize pensions, giving savers more control of their own funds, are good news for sophisticated investors who will welcome the opportunity to further diversify their pension savings to both spread risk and offer significant returns. We are delighted to have found a SIPP provider willing to allow clients to make their own investment decisions.”
“I think from ThinCats’ point of view, this has always been a prime target market for us. I’ve always hoped that we could get a significant proportion of the funds on our platform from personal pensions – between 20% and 50%. I think it’s a major opportunity.”
Mr. Caley also pointed out that, at present, it’s an opportunity that ThinCats alone is equipped to take advantage of. Consumer lending platforms cannot currently facilitate investments via SIPPs, and the largest peer-to-business lender – Funding Circle – is unable to offer SIPP investments due to the fact that many of its loans are unsecured.
As Samir Desai of Funding Circle commented to the FT:
“We would love to enable people to lend through SIPPs, but it’s very complicated. We would partner with a SIPP provider, but they’re nervous because this is a new industry.”
One such complication, as Rhydian Lewis of RateSetter explained, could arise if an investor lent to a “connected party” – a family member for instance – who could then accept the money without paying income tax.
Clearly, there are a number of kinks to work out, but this is an exciting step for the industry and one that appears to have flown slightly under the radar – particularly compared with the masses of coverage afforded to Isa inclusion.
Guy Tolhurst of Intelligent Partnership described the impact he sees SIPP inclusion having on advisors:
“We are witnessing an understandable trepidation from SIPP Operators towards the inclusion of p2p, a third thematic review with a focus on investment inclusion and FCA ‘investment restrictions’ have narrowed the SIPP route for p2p platforms. The vast majority of advisers still proceed with caution when recommending anything deemed as ‘non-standard’; implicit endorsements such as ISA and SIPP inclusion will undoubtedly help. However there is still a lot of adviser education and access to verifiable data required if we are to start seeing p2p becoming more intermediated; but with advisers having £590billion of assets under influence it’s hard to ignore as a route to market.”
21 March 2023
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