Beating the Bank

Many of our clients express their strong dissatisfaction with the interest rates currently available on bank and building society deposit accounts. Even taking a fixed one year or two year rate or a notice account fails to provide an inflation beating rate of return.

For some time now I have been looking at “Peer to peer lending” websites such as Zopa, Ratesetter and Funding circle. These work on the principle of crowdfunding where lots of investors make small loans to either individuals or companies, in the case of Funding Circle. The website technology allows savers and borrowers to cut out the middle man i.e. the banks and building societies and the objective is for borrowers to obtain competitive loans and for savers to be rewarded with higher interest.

A word of warning is that currently these organisations are not regulated and they are not protected by the Financial Services Compensation Scheme, whereas bank and building society depositors are protected should the institution fail up to £85,000 for each individual saver. Should the peer to peer organisation fail, therefore, savers could lose all their money.

Nevertheless, if you are happy using the internet, I believe, it is at least worth a further look into this if you haven’t done so already. If you do take the plunge for this type of saving, it may be worth limiting it to a small proportion of your savings initially to get a feel for how it all works. This is not meant as a recommendation as this would require us to take account of your personal circumstances. However if you are interested in finding out more, a good overview may be found at; http://www.lovemoney.com/news/savings-investments-pensions/alternative-investments/18669/what-is-peer-to-peer-lending

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