Why RateSetter Is Which? Readers' Best P2P Platform

Why RateSetter Is Which? Readers’ Best P2P Platform

We're delighted to present an article written by Ceri Williams who works in Investor Operations at RateSetter, one of the world's largest peer-to-peer (P2P) platforms

Five years ago, RateSetter launched when P2P lending was almost unheard of. Today, RateSetter is an online, dynamic, order driven market place of over 26,000 investors and 160,000 borrowers. The RateSetter platform allows individuals and companies to set their own rate in a regulated, digital environment. So far, RateSetter has originated over £850 million in loans and returned £25 million in interest to its investors. You can now shelter that interest in your pension wrapper.

Ceri Williams, RateSetter

RateSetter P2P Loans Are SIPPable

RateSetter is one of the largest P2P platforms in the UK. Having led the UK market last year by volumes, RateSetter has continued to set the pace by becoming the first of the larger operators to partner with a series of innovative trustees allowing SIPP holders to gain access to its platform.

At RateSetter, we believe that pension freedoms have made life a lot easier and has reaffirmed our belief that eventually, you will be able to decide entirely where your retirement savings can be invested.

Being able to put P2P investments into a pension wrapper is hardly breaking news, and indeed a lot of kudos must go to the forward-thinkers in the market that have been accepting these investments and also the platforms that have made it happen. RateSetter has now joined that party, and is the largest P2P platform in the country and we understand the sole consumer loans provider to be eligible for these tax efficient vehicles.

Obtaining SIPP Acceptance For RateSetter Loans

The key issues RateSetter needed to solve were the regulatory processes and the articulation of the risks involved. Quite rightly, until the SIPP trustees were happy with these key points, there was little chance of moving forward. RateSetter has worked for nearly three years getting this process right and we now believe we have a great solution that is as straightforward as possible for the account holder to invest in RateSetter loans that offer great returns against a low risk profile.

Positioning RateSetter Loans In The Marketplace

P2P lending through RateSetter is a great way to make traditional deposits work harder. There are a whole host of products in the market that could be aligned with P2P: fixed interest over a given period. These are often sold as ‘fixed term deposits’ or simply ‘bonds’, and offer uncomplicated sources of interest. RateSetter is now a passive investment that requires little attention but beats the majority of these products the majority of the time. Indicative rates are anything from 2.5-3 per cent for monthly loans (annualised) up to 6.5 per cent over five years.

Essentially, RateSetter offers a higher return than traditional deposit accounts, with a more predictable return than the volatility of stockmarket investments.  RateSetter loans arguably sit somewhere between these two assets classes.  Whilst RateSetter loans provide fixed interest, lending is not without risk and lending isn’t covered by the Financial Services Compensation Scheme.

RateSetter Reduces Risk Through Diversification

RateSetter distinguishes itself from the pack by offering two forms of diversification giving an extra degree of comfort above and beyond our external risk management practices.

1. RateSetter Provision Fund

We were the first platform to install a Provision Fund – every borrower that takes a loan is given a risk score (Equifax and Call Credit are used) which applies a fee to the annual percentage rate that is paid up front into the Provision Fund. This now sits at around £16.5 million, protecting a loan book of nearly £470 million. To put it into perspective, that is around 3 per cent coverage. The chart below will give you an idea of our default rates since our inception. No lender has ever lost a penny by investing with RateSetter as a result of the Provision Fund.

2. RateSetter Lends Across Sectors

The second form of diversification comes from the knowledge that we are not sector specific. We lend into several different sectors such as cars and home improvement, but also offer finance for things such as mobile phone contracts, as well as taking security on property and commercial loans.

These two aspects have combined to produce an enviably low default rate, as illustrated below.

ratesetter p2p

Include RateSetter Loans In Your SIPP

If you’re looking for a more predictable interest rate return on your SIPP money without the volatility of the stockmarket, discover how lending your SIPP money on RateSetter could work for you by clicking the blue RateSetter button below.

RateSetter

A Potted History Of RateSetter

ratesetter p2p

Include RateSetter Loans In Your SIPP

If you’re looking for a more predictable interest rate return on your SIPP money without the volatility of the stockmarket, discover how lending your SIPP money on RateSetter could work for you by clicking the blue RateSetter button below.

RateSetter

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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets

That's our opinion.  Not just because AJ Bell was the first company to offer an online SIPP.  Nor that it's received many prestigious awards.  And not even because the wife of SIPPclub's Founder has an AJ Bell SIPP.  It's because it's one of the most competitive stockmarket SIPPs on the market. 

Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).  However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.

Visit AJ Bell

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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.

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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.