We learnt in early January that RateSetter was working towards capturing the self-invested pensions opportunity. That work may come to fruition within the next few weeks. RateSetter will soon announce partnerships with a pair of “well known” personal pensions providers. The FTAdviser reports that one is a wealth manager with a SIPP trustee business attached. Two core issues have been delaying the tie-ups until now.
The first centres around ensuring the prevention of lending to any “connected parties” via a SIPP or SSAS. Such “parties” include business partners, close relatives and anyone who may inherit from the investment holder’s will. Lending of this nature via a personal pension is illegal – as Ceri Williams, Business Development Manager at RateSetter, explained to the FTAdviser.
Owing to the internalised nature of RateSetter’s matchmaking technology, the worry was that lending relationships of the above nature might be established accidentally – and unbeknown to the lenders themselves. This potential issue has been circumvented by asking investors to supply a list of off-limits borrowers – a self-certification of those that they cannot lend to. These undesirables will then be removed from that lenders’ potential pool of borrowers.
The segregation of bank accounts was also proving an issue, but that too has now been resolved. An added layer of technology has been integrated in order to allow transactions to be carried out only between RateSetter and the SIPP trustee.
We are assured that RateSetter’s partnerships will be in place ahead of April 6th. As of that date, pensioners will have a greater level of control over how they allocate their pension savings. They will no longer be required to buy an annuity. RateSetter is trying to harness the buzz being generated by these freedoms by readying a P2P SIPP and/or SSAS-wrapped product.
Tax-free, high yielding P2P investments should deliver healthier pensions pots to investors. Several peer-to-peer providers, such as Zopa and Lending Works, are busily trying to structure high interest rate, flexible alternatives to the traditional annuity product – giving pensioners a chance to capitalise on their increased freedoms. Doubtless RateSetter will soon turn its attentions to that opportunity as well. Between self-invested pensions inclusion and greater pension savings freedoms, peer-to-peer providers have the chance to supply a superior level of income throughout the pensions journey.
But it’s not as easy as it sounds. Watch Stephen Cave (Greyfriars) and Francis Moore (EPM) discuss the complexities of delivering P2P self-invested pensions products at the AltFi Europe Summit 2015 below.
