84% of savers rule out peer-to-peer lending
The vast majority (84%) of savers would not consider investing with a peer-to-peer lender (p2p), according to new research from uSwitch.
Of them, 59% blame their reluctance on the industry not being covered by the Financial Services Compensation Scheme.
Almost half (49%) put it down to being sceptical about using peer-to-peer lenders because they don't know enough about them.
Meanwhile, four in ten cited the industry not being regulated by the Financial Conduct Authority. And another 22% explained that they are weary about using a firm they haven't heard of.
With only 2% of savers currently using a p2p lending platform, and a quarter of them only expecting to earn £50 or less this year in interest from their cash Isa, Brits are missing out on interest rates that often beat those available from high street banks.
But even the regulation of the industry from April may not be enough to tempt savers into the peer-to-peer loan market, despite the attractive interest rates on offer.
The uSwitch research found that where savers were looking for alternative homes for their money, more than four in ten would use their current account while one in 10 thought a piggy bank would be the best place.
For more on peer-to-peer lending and other savings options, check out our Beat the Banks campaign
Jafar Hassan, personal finance expert at uSwitch.com, said: "To encourage more widespread adoption, peer-to-peer lenders need to convince consumers that their money is safe, and they can't simply rely on regulation to do this. The fact is that many consumers are still skeptical about lending money if they don't know where it's going; others simply don't want to use an online platform."
Giles Andrews, Zopa chief executive and co-founder, said: "Our 52,000 Zopa savers are huge advocates of peer-to-peer lending – with good reason. Zopa offers returns of 4.9% (compared to bank savings rates typically under 1%) and with the protection of our Safeguard fund no saver protected by our Safeguard fund has lost money with Zopa.
"Peer-to-peer lenders in the UK have now lent over £1 billion and with FCA regulation from April this year, peer-to-peer lending offers a more rewarding mainstream alternative to banks.
"We offer a refreshingly easy and different service to traditional financial services organisations and with Zopa savers can see exactly who they lend to – not something they get from a bank. Our mission is to reach every saver and borrower in the UK to give them the better rates and service they deserve."
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.