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P2P Lending Through A Pension
Tax-free P2P lending through a pension is back!
For a couple of years, SIPPclub helped many people use SIPPs – a kind of pension – to collectively lend more than £20 million on a range of P2P lending sites. It was covered in an article published on 4thWay called How To Earn Your P2P Interest Tax Free.
Unfortunately, as a result of changes imposed on SIPP operators in 2016 by the Financial Conduct Authority, P2P lending via a SIPP all but stopped.
However, people are now again lending their pension money in P2P loans.
By way of some background, a SIPP is one of two types of self-invested pension: SIPP and SSAS.
What Is A SIPP?
SIPP stands for self-invested personal pension and it’s a pension in your name. You and your employer can contribute to your SIPP, and you can transfer in your other individual and company pensions.
What Is A SSAS?
The second type of a self-invested pension is a SSAS (pronounced “sass”), which stands for small self-administered scheme. It’s a pension scheme for businesses. So, if you run a trading limited company, you could consider a SSAS, which may offer you, your business, your colleagues, and even your family or friends, more flexibility than a SIPP.
If several of you join the SSAS, it can actually be more cost effective compared to each of you having a SIPP. And once the SSAS administrator has undertaken some due diligence on your chosen P2P platforms, a SSAS could enable you to lend some or all of your pension money in this area.
Three key advantages of a SSAS compared to all other pensions are the ability to lend to your own business, the much broader range of investments you’re allowed to make and that you can pool your money with any other people in the pension plan to buy more expensive assets, such as investment properties.
You can learn more about SSAS in All You Need To Know About SSAS. Also available through that link is an article comparing SIPP and SSAS, and a range of case studies showing a variety of uses of SSAS.
SIPPclub now has a range of SSAS providers willing to allow lending on a number of P2P lending sites. Only those P2P sites that satisfy the requirements of HMRC pension legislation are acceptable: it’s the same criteria for SIPP and SSAS.
Good News For SIPP And SSAS
For some years, SIPPclub has worked closely with a well-respected company that has expertise in all forms of pensions, especially self-invested pensions. It comprises a full service independent financial advisory firm, a SIPP provider and a SSAS provider.
It’s one of the SSAS providers that SIPPclub has on its panel.
Not only does its SSAS accept a range of P2P platforms on which you could lend your pension money and earn your interest tax free, it has also recently confirmed that P2P can be held within its SIPP on a number of platforms. This opens up the SIPP market again after a temporary shut down.
Both its SIPP and SSAS now accept a range of P2P lending sites on which you could lend your pension money and earn your interest tax free.
The typical annual cost of a SIPP that allows P2P lending is around £1,250 plus VAT, so the target market is the wealthier investor. No other annual charges apply, although P2P lending sites will charge their usual charges on top.
A SSAS is a little more expensive, though if more than one person joins the scheme – be it colleagues, family or someone else – the cost per head will fall. There’s also a set-up cost, which includes getting specific tax approval from HMRC.
If you’re interested in lending some or all of your pension money through P2P lending sites, you can specify your requirements on SIPPclub, which will help you to find a SIPP or SSAS provider to meet your needs.
Which P2P lending sites allow lending in a pension?
It's a moving feast, but the following have, at least at some point, accepted pension lending:
- Angels Den
- Assetz Capital
- Capital Stackers
- Crowd for Angels
- Crowd Property
- HNW Lending
4thWay receives no commission from SIPPclub.