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.
The Money-Go-Round
I must admit that I’ve borrowed this title from the nickname of a rather dubious tax-saving scheme thought up in the 1980s by a company called Rossminster Group. Little is found on the Internet about this company, although there is a bit in the obituary of one of Mrs. Thatcher’s ministers, Peter Rees. I became aware of Rossminster through my bank manager and friend, David, who was also bank manager to the Group. He explained what they did as moving money between large number of onshore and offshore accounts, so that it was difficult to say, where it was for taxation purposes. You have to remember that in those days of the 1970s, tax rates were very high and moving money to say the United States to start a subsidiary there was so impossible it was virtually banned. The latter is one of the main reasons, why so few small, but very profitable private companies were successful before the 1980s and 1990s. Any success, especially in a technological field was to be envied and not nurtured, especially if it was in competition with one of the government’s pet projects. And if it was successful, it had to be taxed to the hilt.
My association with Rossminster was rather limited, but I was asked to quote for a computer system to manage all those accounts. I didn’t do much, as I had bigger fish to fry. But David did a lot of business with Rossminster, as all those transfers meant a lot of bank charges in those days. In the end, as he once said he had a good run with the company, but eventually someone offered Rossminster a better deal.
Bankers Get Their Just Desserts
I like this story in The Times about how Bob Diamond has fired some of the jerks in Barclays. Remember that Mr. Diamond has dual British-American nationality so he obviously knows the British equivalent of jerk. I wonder if he called them all a wunch of bankers as he gave them their P45s.
I particularly liked this bit.
Mr Diamond referred to an infamous episode in 2002, when six Barclays bankers celebrating their bonuses spent £44,000 at the London restaurant Petrus, as “the no jerk rule personified”.
“That was embarrassing,” he said. “It was taking advantage — we have a responsibility to our colleagues and to have acted that way in a public place was inexcusable.”
The bankers consumed a 1982 Montrachet costing £1,400 and three bottles of Petrus Pomerol, the 1945 at £11,600, the 1946 at £9,400, and the 1947 at £12,300. There was also a dessert wine, costing £9,200. The restaurant threw in the food for free.
They may have got their food free, but did that include desserts. There’s more details of it here on the BBC.
A Farce With A Cash Machine
On the 18th of October, I tried to draw £50 out of cash machine inside the Nationwide branch at Upper Street in Islington. I tried twice and this was in front of the nose of someone senior in the branch, who watched everything I did, as I complained to him about the slowness of the machine. In the end I got fed up, so I went and did my shopping and then got the money a few minutes later.
When I checked my statement, the next day, not £50, but £150 had been withdrawn from my account. As I was in Leeds that day, I reported it in their branch there.
It is now the 25th and I still haven’t had my money returned. Yesterday, I was virtually accused of doing something wrong, by the person in the branch. So I stormed out, vowing to move my account. I probably won’t as all I need is a simple money transfer system to pay bills.
But it does seem to be taking a long time to sort out a problem, that happened under the nose of one of the branch’s senior employees! The last tine this happened to me it was at an ATM owned by Santander. The money was put back in my account by the next day.
The sum involved is not everything to me, but I am a widow and to some in my circumstances, that £100 would be very important.
Zopa in the Sunday Times
Zopa is featured in an article in the Sunday Times today called “Become a Lender and Earn 15 %”.
Two statements about Zopa stand-out.
Zopa has provided £160m-worth of unsecured loans to consumers since it was launched in 2005 and accounts for more than 2% of such new lending.
If that is true, then they have become a significant player in the personal lending market. I checked with Zopa and they told me that it’s between one and two percent and sometimes up to the higher limit.
And.
Zopa said its default rate is 0.9% against an average 5% to 7% for high street banks.
I would go along with that as my default rate has not been at all high. In fact it’s significantly less than 0.9%.
Banks and Trusteer
There was an article in The Times last Saturday talking about how some banks ask you to load software called Trusteer on your computer to protect yourself.
I won’t! And if my bank insists I do, there are plenty more other banks out there.
Just having the software on your machine, is an indication, that you may have secure data there.
All of my secure work is done on a machine, which is unattached to my network and nothing is written down, that would be any use to a criminal. That is unless he could find where my passwords are stored in my safe deposit box with C’s jewellery. And that is ten miles from where I live!
I’m not saying that I know more about security than banks, but I mistrust deals like this, especially, where keylogging is involved. The banks should follow Zopa’s lead and create an unbreakable and totally secure login, that is impossible for a criminal to use, as unless he is a mind reader, he won’t know answers to the questions they ask.
The Zopa Login
Adnmittedly, I know the people at Zopa well, but is there a financial site, that has such a simple, foolproof and I think secure, login. All you need to remember is your e-mail address and password and know the answers to a set of personal questions, whose answers, most people would know about themselves.
So what would happen if you someone broke my login? They might find out how much I had invested, but they wouldn’t be able to withdraw any money without first setting up a link to their bank account and then authorising the link. Not something that is easily done without leaving a trail of evidence. I suspect too, that alarms would ring at Zopa.
Everybody, who designs a secure login could do no better, than build on the excellent work Zopa has done.
Zopa and a Transaction Tax
One of the great things about Zopa is that the only tax you pay is income tax on any money you earn.
I hope that the EU’s proposed new transaction tax, doesn’t sneak in there somewhere. After all, politicians would love to find a way to tax us more, so how about 0.01% of every transaction going through the banking system? It would be a total loser, as even at a very low amount, the man on the Dalston Omnibus would object strongly to paying a tax on every time he received or paid-out money.
I suspect it won’t happen, but the Euro was badly set up and although it is a very good idea, you can’t really expect all countries to adopt a legal approach, when they see a clever loophole.
But Zopa does mean that you avoid stamp duty on an investment, which like the Stock Market, has a degree of risk.
Milliband To Pledge To End “Fast Buck” Culture
According to this report, Milliband is going to pledge to end the “fast buck” culture.
Ed Miliband will vow to end Britain’s “fast-buck” culture and ensure the “right people” are rewarded, in a speech to Labour’s annual conference.
The Labour leader will say later that the country needs “a new bargain based on a different set of values”.
Unfortunately, the get rich quick ideas have always been with us at all levels of society. As an example, the only shop I can see from my house is a betting shop. If I go down Dalston High Street, it is a sea of similar shops and pay-day loan companies. And look at the success of those legalised loan-sharks, Wonga.
In fact, it will be much easier to curb, the “fast buck” culture in the City, as many responsible people I know, steer well clear of the more dodgy practices that brought us some of the very high risk financial instruments, that took a lot of banks to their knees. It used to be in the city, that when you invested in Lloyds and similar companies, if it all went wrong you lost everything. Consequently, the risk management was a lot better, proving Dr. Johnson totally right about hanging.
Incidentally, I was urged to join Lloyds and didn’t! Why? Because it’s my money and I like to have some slight control over what happens to it.
Thinking after what I have just written about Lloyds, wouldn’t it have been better to have put the various bad banks like HBOS and Bank of Scotland into receivership, rather than use them to poison Lloyds TSB. After all, they were very much a victim of Milliband’s “fast buck” culture. But NuLabor made the mistake of saving them. And who was at the centre of that process?
The Greeks Can’t Spell Tax
Just heard David Bewick of BGC Partners on BBC Radio 5.
He said the above in a rather far-reaching appraisal of the economic state of the world.
He said two other points of note.
- The Greeks have no commerce or manufacturing of note.
- When did you last hear a profits warning, from a company that wasn’t a bank?
It was all very entertaining.
I’ll add some good news of my own. In July, I earned 5.88% before tax on the money I have in Zopa. In August, it was down to 5.40%. So what has been my return for the first 24 days of September? It’s back up to 5.88%! They always say about investments that they can go down as well as up.
The Anonymous Widower 