Over the past eight years, I have built up a seasonable six-figure sum in Zopa. It has paid me upwards of five or six percent after all deduction of losses and charges over those years and it has been a safe investment compared to some others I could have made.
But now is the time to liberate it, as I want to invest in something important to me, and liberating any of my other investments, would mean reducing my pension pot.
I am not selling any of my performing loans in Zopa, but just liberating any interest and principal repayments. Typically, about six percent of the money I have invested in Zopa is returned to my bank account each month.
It has been a painless way to fund my investment.
Various financial advisers have told me that peer-to-peer lending like Zopa is risky. But of course, there’s no way they can get a commission.
Zopa have just told me that because of the large amount of money they are getting in and the shortage of good creditworthy individuals to lend it to, they have decided that although existing borrowers like me can continue to reinvest, that for a few months we won’t be able to add new money.
This doesn’t appear to be any problem with Zopa except one of success.
But it does say to me that if you are an individual with a good credit rating, that Zopa could be a place to look for a loan.
My Google Alert for Zopa picked up this article from Yahoo, who got it from the Telegraph.
The title of this post and the Yahoo article says it all.
If pension pots end up in Zopa and the other sound peer-to-peer lenders, just what is this going to do for banks, as it will probably mean that all the decent personal loan business in their hands will go to the peer-to-peer lenders.
I wouldn’t think bank shares look to be a good long term investment.
The growth of Zopa might have an interesting side effect. Imagine a group of friends having a quiet drink in a pub and one of their number turns up in a shiny new car. On discussing the purchase, the buyer reveals they bought it with a Zopa loan, that they got at a good rate, because they have a good credit rating. So will their jealous friends, decide to do something about their dodgy finance, so they too, can have a decent set of wheels.
Peer pressure can work in mysterious ways.
If it does encourage people to clean up their finances, Zopa will have achieved something, that financial commentators and politicians have been trying to do for years!
I think too, that Zopa, which has just lent its billionth pound, is now getting too big for politicians to stop or even nationalise. Which probably means that money in Zopa is even more secure.
I don’t understand ISAs but I know a man or woman who claims they do. Read their article on the Zopa web site.
When I log in to my bank, I get an advert saying I can get a wonderful rate of two percent, if I lock money away with them for two years.
At present I have a sum of money invested in Zopa and my current return to date this year is just around five percent. Admittedly, I pay tax on that so it’s effectively a rate of three percent. With Zopa’s Safeguarding promises, that money is guaranteed.
So I’m getting an effective rate that is half as good again, as I would with the best banks.
But the big advantage of Zopa has shown itself this month.
I have the last Tax bill to pay concerning the sale of my house in Suffolk and also the bill for the handrails for my staircase, which as they were custom-made weren’t cheap. Couple that with other expenses and I have a lot of bills to pay at the end of this month.
But due to the churn in Zopa, every month, I get access to about six percent of the money I have deposited in the system, as borrowers repay capital, pay interest and end their loans early. So instead of reinvesting this money as I do normally, I have withdrawn most of the money to my Current Account, so I can pay my bills.
I have a feeling that I have actually withdrawn a couple of thousand too much. But no matter, when all the bills are paid it’ll go back into Zopa. All I’ve lost is three percent gross on £2,000 for a month or a fiver.
So why do people put so much faith in the Banks, as they rip us off?
My Current Account at Nationwide is mainly just a means to transfer money to and from other accounts.
What other benefits do I get?
1. At the Angel, there is an inside ATM, that I use when it’s pouring with rain. There are also seats, so if I’m drawing out a larger amount of cash, I can sit down and put everything away properly.
2. I have a Credit Card, which is recommended by many, that if I use abroad, charges me nothing extra for the currency conversion.
3. I have an on-line bank account, that to access from anywhere in the world, only needs to have information stored in the brain, I was born with.
4. I get a basic travel insurance, which covers me for everything but medical expenses. So if easyJet or whoever, were to lose my baggage on the way to wherever I’m covered.
On the other hand, I get the following annoyances.
1. The dreaded Verified by Visa, when I use the debit or credit card on-line.
2. No contactless service on the Credit Card, which means I have to carry another credit card that does, in case I lose my Freedom Pass.
Nationwide should be pleased that I’m not thinking of leaving yet!
Over the next couple of months, I have some moderate-sized bills to pay, like my Tax Bill and also some works to my house including the handrail. My pension will cover most of them, but I’m still a few grand short until the end of July, which is the last day, I can pay the Tax.
Normally, most people would liquidate an investment to make up the shortfall. And there’s always some extra charge from a middle-man, who presses the buttons, but does nothing.
But I have a sum of money invested in Zopa, which because of the nature of the site, generates a guaranteed amount of money each month, from repayments and interest from loans. Normally, these repayments peak around the first few days of the month, so until the end of July, I shall have two peaks, with a third due around the third or four of August.
Normally, I reinvest the repayments back in Zopa, but all money I receive until the end of July will be quietly moved out to my current account, so that I can pay my bills.
And then on the 31st of July, any surplus will be returned to Zopa.
The various transfers to and from Zopa will cost me a big fat zero.
This is said in this article in The Independent.
Tax on income from savings will be abolished for millions of people in the Budget today as George Osborne woos pensioners and “hard-working taxpayers” ahead of the May general election,The Independent has learnt.
So is the paper right?
It would make a lot of sense.
1, It would certainly encourage saving.
2. Encouraging saving may mean that more money will go into peer-to-peer lending, which will help lower interest rates for borrowers and give the banks a bit of a kicking. So a by-product of abolishing tax on savings interest could be better availability of finance for individuals and businesses.
3. I can see those who provide homes for savings like banks, building societies and peer-to-peer lenders getting increasingly innovate in finding ways to create high-interest, instant-access accounts.
4. It could put a lot of financial advisers out of business, as if say you had a lump sum to invest, you could easily work out what would be the best savings account, to keep the money until you need it.
5. But surely, the biggest benefit will be that as savings will now be held in an account, that doesn’t carry any tax, it will simplify tax accounting and returns for banks, building societies and savers alike.
If he does do it, then just imagine how any party who put it back would fare in an election!
On a personal note, if it does happen, I’ll be putting more of my money into Zopa!
This article in the FT, entitled Zopa To Launch Product For Retirement Savers is a must-read for anybody who is retired or thinking about it. This the first paragraph.
The UK’s largest peer-to-peer lending service, Zopa, is developing a new investment product tailored to people beyond retirement age who will have much more flexible access to their pension savings from April.
It sounds that I’m using my Zopa funds in a similar way. There is one big difference though in that I’m doing it using the standard Zopa system, so I’m not paying anybody in the middle for commission or advice.
My use may have advantages, in that as funds comes available they can be stored away in Zopa.
I’m publishing these figures, as in my view, they are very indicative of a mature Zopa account.
Remember that I started investing in 2008, so some of the money is possibly on its third loan.
I have added to the pot over the years, when I have spare money left over at the end of the month. I’ve also repatriated money at times, when because of circumstances, I have some large bills to pay.
At the start of the year I had £147,000 invested and at the year end that had risen to £156,000.
Over the year, I’ve actually taken out £16,700 and paid in £18,500, so I haven’t really paid anything into the pot.
Interest and repayments to my holding account in Zopa has been almost £96,000, which conveniently works out at £8,000 a month. So I could bring up to this sum into my bank account for paying bills every month. As these payments usually occur around the beginning of each month, it is very easy to juggle them with my approved overdraft limit to avoid paying the wunch, excess fees I don’t need to.
Over the last year, the amount of money I’ve earned works out as a return of five percent before tax.
Because most of my money has been lent out in the last couple of years or so, I suspect that a high proportion of my Zopa money is covered by their Safeguard scheme.
The downsides are that I could earn more with more risky peer-to-peer lenders and I have to pay tax on my earnings.
I never give financial investment advice, but I have found Zopa to be the ideal mattress to put my spare money in a place, where I can access it reasonably quickly. It certainly pays a better interest rate.
The Flow boiler will be launching in January 2015 and will be available to customers through a new finance package. This will provide a payback time of five years for the complete cost of the boiler. Customers may purchase the Flow boiler using a separate unsecured personal loan via Zopa, with repayments being off-set by reductions in your home energy bill from the value of the electricity generated.
I think we’ll see a lot of deals like this, where two new companies in different fields link up to make two and two add up to six.
This is disruptive innovation at its best.