The Anonymous Widower

The Zopa-Go-Round

The title of this post, nods a little towards Rossminster, which was credited with a rather dubious tax avoidance scheme, that was nicknamed the Money-Go-Round, by the press.  The two companies Zopa and Rossminster operate in different fields and I suspect they have really nothing in common.  But I like the title.

Now, why do I call it the Zopa-Go-Round?

Usually saving accounts fall into two broad categories.

• The account gives you instance access and an obscenely-low interest rate.
• Your money is locked in for a year or maybe longer, but you get a slightly better rate.  But getting your money out early is not only extremely difficult, but it comes at the cost of various financial penalties.

Zopa is something different and very much between the two.

As 2011 has just finished, I now know that I earned just under six percent before tax over the year and that includes all bad debts and charges.

Not a bad rate considering that you have no restrictions on withdrawing money, if it is in your account. So if you have just been paid some interest or some capital has been returned, you can transfer it to your bank account without charge, if that is the place you need it. There is also no charge for putting more money in.

So one of the great things about a Zopa account is that it can be used like a higher interest deposit account without the restrictions and you can move you money in and out freely, as it suits you.

If you take my circumstances, it illustrates how a Zopa account can be used.

When I moved here, I was unable to sell my stud in Suffolk, so I am living on my savings in the Zopa account, plus a small drawdown from my pension. So each month,  instead of re-investing all of the money that I earn from Zopa in new lending, I retrieve enough to pay my bills and expenses.  If I have any surplus at the end of the month in my current account, I transfer this money back into Zopa.

In my case, much of  the capital I have put in, is still lent out to borrowers, but is of course paying regular interest. I could if required sell some of these loans on, but as most are up-to-date, I prefer to keep the borrowers I know, rather than new ones I don’t.

So the money goes around and around and sometimes I choose that it comes out my way.

Hence Zopa-Go-Round!

You can think of many people, who might want this form of flexibility.

I don’t think that my situation is untypical, as often there comes a time in one’s life, where you downsize your house or your possessions.

C and I had always intended to sell up and move to London, although we’d never put a date on it.  but we had window shopped for a house in Hampstead. Unfortunately, her premature death put an end to all those dreams. A lot of our possessions would probably have been sold and we wouldn’t have really needed to have three good cars and a horse box.

So just like many, on retirement, we would have a few thousand pounds to either spend or save. Hopefully, the sale of the stud, would have bought a desirable house, where we wanted it.

As I have found, Zopa has been an ideal place to put that money and draw it out as and when I need it.

Zopa though, isn’t the best place to put money, that you might need in a few months, unless you are prepared to use their system to sell good loans to other people. So it wouldn’t be the best place to save your money to pay the taxman, unless of course you save more than you need or do very detailed calculations.

One thing to remember is that if say you put £10,000 into Zopa and lend it for three years at an average rate of five percent, you’ll get just over £300 a month back.  I’m assuming that you don’t adjust the interest rates you charge to get the best return and that you don’t reinvest  the money returned.

January 1, 2012 - Posted by AnonW | Finance & Investment, World | Banks, Zopa