The quickly growing consumer lending outfit Lending Works is looking to become more pensioner-friendly.
From April, pensioners will have a far greater level of access to their pension fund savings. Elderly savers will no longer be required to funnel their pension pots into an annuity. In response to these increased freedoms, a large number of alternative financiers have been vigorously targeting the pensioner market. Lending Works is looking to take an early lead.
The platform has just unveiled the newly minted Auto Income tool – which allows its lenders to automatically draw down interest repayments, principal repayments or a combination of the two. Lenders may draw down these funds at pre-determined intervals, free of charge, creating a regular source of income. The drawing down of returned funds previously required a more hands on approach.
To clarify, the Auto Income tool does not allow investors to recoup funds that are out on loan. Lending Works features an early access tool for that purpose – but recoupment is not instantaneous and it comes at a cost of either £20 or 0.6% of the funds taken out, whichever is larger.
Lending Works is of the belief that pensioners have long been hungry for a product in the mould of Auto Income. The high interest rates on offer via P2P are a clear draw, but flexibility is key. Nick Harding, Founder and CEO of Lending Works, explained:
“We are really excited about the opportunity Auto Income brings in terms of expanding our customer base to those who are looking to use peer-to-peer as an income tool as well as a growth tool.
“Our customer feedback shows that more and more later-life lenders are turning to peer-to-peer to earn great interest rates, but not all of them want to tie their money away for several years. Auto Income answers this need completely, providing the agility and flexibility that customers expect from alternative personal finance providers today.
“Innovation is one of our values, and we have lots more innovative ideas in the pipeline!”
We reported at the start of the year that Zopa was busily crafting a product to rival the outdated annuity – one that would allow lenders to draw down cash at a higher rate than that provided by the interest. That’s a slightly different proposition from Lending Works’ Auto Income, which is essentially a streamlining tool.
Veterans Francis Moore (EPM) and Stephen Cave (Greyfriars) – speaking at the AltFi Europe Summit 2015 – opined that the opportunity for marketplace lenders to provide income to pensioners considerably outweighs the P2P ISA opportunity. The UK platforms have taken note, and are busily fine-tuning their products in preparation for the advent of increased pensioner freedoms in April.