The Anonymous Widower

Peer-To-Peer Lending To Be Allowed in ISAs

The blog on Zopa has just reported that peer-to-peer lending will be allowed in the new ISAs. These new ISAs were announced in the Budget. Here’s part of the blog post.

Fantastic news for savers today as peer-to-peer lending will soon be included in ISAs as announced by George Osborne in the Budget today. The peer-to-peer ISA is an extremely exciting saving option for UK savers – enabling them to grow their money much faster, with reliable and safe returns.

By lending through Zopa with an ISA, UK savers will be able to make at least 2.5 times more interest than the sub 1.6% cash ISAs from banks with the same tax free benefit. Unlike other riskier stocks and shares ISAs, a more reliable and predictable Zopa ISA would allow every saver to become a millionaire under 30 years at the current rate of 5% if they used their full ISA allowance and would double their savings to £2m by saving for a further 11 years. Meaning that by 2044 you could be aZopa millionaire with over £649,000 in interest alone!

So after annoying insurance fat cats earlier, he’s now produced a nasty little surprise for that wunch of bankers, who like to sell underperforming investments, or products that nobody needs or wants.

March 21, 2014 Posted by | Finance | , , , | 1 Comment

Gluten-Free Quiche At Romeo’s

This gluten-free quiche was delicious.

Gluten-Free Quiche At Romeo's

Gluten-Free Quiche At Romeo’s

I now seem to go most Friday’s for lunch.

March 21, 2014 Posted by | Food | , , | 1 Comment

Could You Use Zopa As An Annuity?

In this discussion, I’m using Zopa as it the peer-to-peer lender I know best. But the analysis could probably apply to your own favourite.

Zopa also has the following features.

1. Your Investment Is Probably Safe

I say probably, as occasionally, one of my loans has gone into default, but now Zopa  safeguards your money. Here’s what they say on the website.

Earn great returns on your savings with peace of mind. The Safeguard is a fund designed to step in and give you back all your money, plus interest, in the rare event a borrower cannot repay. Find out more about the Safeguard fund.

But even so, my losses on older loans before Safeguard have been about four percent of the total interest I have earned on my investment.

2. Automatic Reinvestment

If you should so choose, you can re-invest any money that is credited to your account because of interest earned or loans repaid.

I don’t use this feature, unless I’m going away for a few days and probably won’t be checking my Zopa account.

I normally re-invest any money return manually.

But the automatic reinvestment can be easily switched in and out.

3. You Are In Control

If you want to add more money to your Zopa pot, it is just a simple transfer.

If you want to remove some of the repayments or interest, it is just a simple transfer out and this has got faster recently.

4. You Are Not Part Of The Loan Management Process

On the other hand, you are not part of the loan management process and so you don’t get involved with any tedious paperwork or micro-management. As I have thousands of loans in Zopa, it’s a process I want no part of it.

As a software man of a certain experience, I would prefer to trust well-written software Rather than my own judgement.

5. One Percent Fees To Savers

Click here to see what Zopa says about fees to savers.

My use of Zopa is to have a sizeable pot there, which I add to, as and when I have spare funds available.  Usually, this is around the 12th of each month, as that is after all of my monthly bills have been paid.

Recently, I have needed extra funds for work on my house, so I’ve withdrawn money from Zopa at times, instead of re-investing it.

So to return to the question I asked about can Zopa be used as an annuity!

Suppose you invest a sum and you want this to give you an income of say £3,000 a month, which you wanted to be paid on the 20th of each month.

At the start of each month, you would switch off Zopa’s auto top up feature, which means that any repayments and interest go in your holding account.

Then a couple of days before the 20th, you transfer the required £3,000 out of Zopa into your bank account. Any surplus would be reinvested and auto top-up could be switched on again.

Obviously, you would need sufficient funds in Zopa to generate at least £3,000 of interest and repayments in a month.

If I pro-rata my mature Zopa portfolio, then I would estimate that a pot of about £100,000 would be needed to extract £3,000 a month.  But don’t take that as gospel, as it needs a proper calculation to be done.

I’ll be working on it.

On the other hand using Zopa as an annuity has lots of advantages.

1. Flexibility

If say one month, your horse has just come in and you’ve won several thousand in the 4:15 at Kempton, you can leave the money to accumulate.

And if in another, your car needs repair, you can take out everything you can.

2. You Can Cash It All In

I often wonder what would have happened, when my wife got cancer, if we hadn’t had any money or two sons who could drop everything and help. It would have been difficult in the extreme.

But a Zopa fund could have been liquidated without penalty and used as income in the last months or years of my wife’s life.

You can sell on good loans, but I’d have just not bother to reinvest any money and transferred it all out of Zopa.

3. Transfers To And From Zopa Are Going To Get Faster

This is something that is happening and will improve all our lives in the future.

But it particularly helps with an investment like Zopa, where you’re effectively using it as a quick-access deposit account.

It wouldn’t be fair not to state the disadvantages.

1. You Can Earn More With Other Peer-to-Peer Sites

There are always other better ways of earning higher returns, but then they usually come with a higher risk profile.

It’s your money, so do the research and make your choice.

After all we all know the old joke about the best way to  make a small fortune! Give a large one to a financial advisor!

 

March 21, 2014 Posted by | Finance | , , | 2 Comments

The Increased Speed Of The Zopa To Nationwide Transfer

I needed to remove some of the excess interest and repayments in my Zopa account to top up my Nationwide current account.

The last time, I looked at the speed of this, it took three or four days before, it was fully documented in my bank account and available for use.

I initiated the transfer at 06:43 on the 19th. I know the time precisely, as Zopa send a check e-mail on every requested transfer. The payment arrived in my bank account sometime before 06:00 this morning. So it was definitely under forty-eight hours.

Remember too, that I’m only siphoning off interest and repayments from Zopa.  In a typical month you get upwards of five percent of your investment in Zopa, available for withdrawal, without cashing in any loans.

I’ve used Nationwide and Zopa as an example here, but I suspect most other reputable institutions, companies and individuals are the same.

I think the only thing that will happen to this sort of transfer in the future is that it will get faster.

March 21, 2014 Posted by | Finance | , , | 2 Comments

It’s All Our Fault!

BBC Breakfast had an interview this morning, with a guy from the insurance industry.

He blamed the poor quality of annuity products on the fact that we’re living longer, low interest rates and customers being more intelligent.

Just as we’ve had peer-to-peer lending for banking, we need a clever person to think up a killer application, that looks like an annuity, but gives a better return with no fees to insurance fat cats.

The cream should stay with the insured.

March 21, 2014 Posted by | Finance, World | | Leave a comment