Dr Tony Robinson explains how he arrived at peer-to-peer lending with Assetz Capital using a full SIPP
All I needed now was a new SIPP that allowed me to invest in peer-to-peer lending and SIPPclub allowed me to do that. There was a substantial amount of paperwork involved, but I only started this process on 23rd December, probably the worst day in year to start, I got a lot of friendly help from all parties and I expect my pension to be invested in peer-to-peer funds next week, shortly after 19th January, thanks to all the support I got from SIPPclub and Assetz Captial.
All My Life I've Been Into Optimisation
In my early teens, I won a "guess how many coins in the pile" competition by putting the picture under a microscope, making a technical sketch and then estimating the uncertainly in each of my guesses and submitting very many entries that mapped out all the possibilities.
Earlier, I built a windmill out of a wind up telephone and lots of wood and erected it on top of our climbing frame in the back garden. It did deliver electricity to the house but only briefly, the vibrations destroyed the climbing frame.
Through luck and hard work I ended up with three Cambridge degrees, the latter two and my subsequent lectureship being in Information Engineering at Cambridge. In that time, I pioneered the use of neural networks in speech recognition and it is this deep learning which has led to the availability of speech recognition on smartphones today.Of course there is always work to do but I've often got to pinch myself when I see speech recognition working near perfectly on Apple, Google or our own Speechmatics service. In the early '90's, I never thought that we would ever make it work so well, and most of this is down to optimisation.
It Will Come As No Surprise To Learn I've Spent A Lot Of Time Optimising My Pension Strategy
Reward (as everyone wants) and risk (nobody wants the uncertainty of how much the value may increase or decrease that's out of your control) are the main variables to optimise.
SIPPs, ISAs and low cost Exchange Traded Funds (ETFs) worked for me for a long time, but the variability of returns of equities is relatively high and the yield of bonds is low, so I went searching for something better.
Three years ago I found this in peer-to-peer lending. These offer a simple website to manage funds and allow you to generate far greater returns for very low risk. In my three years, I've averaged over 10 per cent return after less than 0.5 per cent lost due to borrowers defaulting.
To me this gives the most secure income outside of a deposit account as well as return that should allow me to retire years earlier. All the different peer-to-peer companies have different strategies. I've been mostly impressed with Assetz Capital who specialises in asset backed security. It appeals to me that there is something tangible to support the loan so that if things do go wrong then losses, if any, will be minimised by sale of the borrowers assets.
For example, they have many wind turbine loans for which the government provides a fixed feed-in-tariff, so not only is the loan more secure, there is also the feel-good factor of supporting sustainable energy.
My income has been very variable over the years, but I was very fortunate in that my highest paid job offered a pension salary sacrifice scheme which meant that much of my income (including all the employers and employees National Insurance contributions which add up to another 15.8 per cent) could go into my SIPP, which along with previous contributions resulting in a significant six figure sum.
Recently the government announced that we will have flexible drawdown of pension funds from this April. As someone who can see age 55 in sight, the final part of this optimisation puzzle fell into place. Flexible drawdown will allow us to take our pensions when we want and when we need the money, all with 25 per cent tax free.
As most of my money went in as a higher rate tax payer and will come out as a lower rate tax payer, overall that's a 70 per cent increase in spending power over saving in an ISA.
All I needed now was a new SIPP that allowed me to invest in peer-to-peer lending and SIPPclub allowed me to do that. There was a substantial amount of paperwork involved, but I only started this process on 23rd December, probably the worst day in year to start, I got a lot of friendly help from all parties and I expect my pension to be invested in peer-to-peer funds next week, shortly after 19th January, thanks to all the support I got from SIPPclub and Assetz Capital.
The beauty of this new set up is that I can put as much or as little time into it as I want whilst removing all the worry about stockmarket volatility.
I've got access to credit and valuation reports to do my own due diligence on any loan, which is what I like to do at the moment. What's more, they have a wonderful automatic investment facility that allows you to sit back and let the computers automatically reinvest all the monies coming in back into the loans that you've targeted. This normally happens in seconds so it's easy to remain 100 per cent invested which means all of your money is working for you all of the time.
And there's talk of being able to hold peer-to-peer funds in ISAs, so I'm keeping mine topped up and when that day happens I'll do the same thing again.
Crowdfunding And Peer-To-Peer Risk Warning
When a platform has been assessed and approved by a SIPP or SSAS operator, this does not imply that any loan or investment opportunity is endorsed in any way. A SIPP or SSAS operator's due diligence review is limited to ensuring the processes and procedures of the platform are in line with both FCA and HMRC principles. It's entirely your responsibility for carrying out your own due diligence on any loan or investment opportunity before agreeing to lend or invest your pension money on a platform. As a SIPP or SSAS operator will continually review platforms from a regulatory perspective, it's possible for a platform to become 'unapproved' if something changes.
With peer-to-peer lending, your capital is at risk if you lend to individuals and businesses. You may lose some or all of the capital lent if the borrower defaults and is unable to meet its liabilities. Historic loan default rates are not necessarily indicative of future default rates. In addition, lending is an illiquid investment, which means you may not be able to access the capital you lend for the duration of the loan period, even if the platform offers a secondary market. Investing in any business involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Crowdfunding is generally targeted at investors who are sufficiently sophisticated to understand the risks and make their own investment decisions, based on their knowledge, experience and financial capacity. Neither crowdfunding nor peer-to-peer lending is covered by the Financial Services Compensation Scheme. The tax treatment of your investment is dependent on your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of crowdfunding investment or peer-to-peer lending, you should consult a suitably qualified independent financial adviser.
As SIPPclub neither advises on, nor arranges, nor recommends specific investments or strategies, we're unable to say whether a SIPP or SSAS or any investment within it is right for you. Ultimately, it’s your money and your decision, and you should only proceed once you're satisfied you've undertaken sufficient due diligence. If you need advice, you should speak to your trusted adviser, or you could find a local adviser from Unbiased.co.uk. Alternatively, we'd be pleased to introduce to a suitably qualified independent financial adviser.
Please read our full Terms which includes criteria for SIPPclub membership.