An Innovative Way to Plan your Retirement? Read Our Actionable Guide to IFISAs for the Over 60s
(Capital at risk - Past performance does not guarantee future results)
Age, like taxes, comes to all of us. As we get older time seems to speed up – and no one knows why. One day you’re in your early forties and then suddenly you’re staring retirement in the face and wondering how on earth you got here.
Like a fine wine, we are sure that you’ve improved with age, if we may be so bold.
At least, we hope that you’re looking forward to your Golden Years, safe in the knowledge that your health is robust and that your finances are in good shape. When you start seriously to think what your life after work will look like, knowing that you’ll be supported by adequate pension provision can give you the peace of mind you need, and deserve.
Here at easyMoney, we think that an IFISA could be a valuable part of your future financial planning. We’ve put together this blog to offer you some clarity on ISAs and how our Innovative Finance ISAs in particular could be an excellent way to help you save for your retirement.
So, when it comes to pensions, where are we now?
We’re aware anecdotally that most of us don’t think about saving for our older age until it’s almost upon us, and even then, we don’t put aside enough funds.
Some basic facts and figures
According to a recent survey from the consumer magazine "Which?", the average household spends £2,170 per month in retirement.
Opinions and analyses vary (not least with personal circumstances and average life expectancy), but a quick Google search, “how much do I need to retire on” reveals a sum of anything from £300k to £700k, with an average figure of £600k somewhere in the middle. Factor in the state pension – currently £175.20 per week - and it’s obvious that there’s some shortfall here.
The state pension is, for nearly all of us, not going to cut it.
Where we are with savings
If you have money in a bank or in a basic savings account, your money could almost be going backwards, not least due to inflation. With the current Bank of England base rate at 0.1%, those folks in Threadneedle Street have helpfully pointed out that should you invest £1,000, you’ll have £1,001 to go mad with after one year.
This low rate also applies to cash ISAs, and with the personal savings allowance exempting most people from paying tax on their savings, they’re not as popular as they once were. Stocks and shares ISAs remain buoyant, although as with all investments in the stock market, carry a degree of risk.
However, in our opinion, ISAs are still on the radar. Introduced in 1999 to replace PEPs and TESSAs, we think they’re a positive way to save; they’re super low-risk and carry no tax burden on interest rates. Invest up to £20,000 and the tax man can’t take away a percentage of the interest.
Moving away from cash and stocks and shares ISAs, here’s your jargon-free introduction to Innovative Finance ISAs, or IFISAs. How do they work, and how could they work well for over 60s?
What is an IFISA?
With an IFISA, you invest your annual tax-free allowance of £20,000 in peer-to-peer lending (P2P). Here at easyMoney, we’re a P2P platform, in effect putting lenders such as yourself together with carefully selected property sector borrowers. The money you lend them earns interest, which is returned to you on a monthly basis, completely tax-free.
We’re going to manage your expectations here: whilst no investment is or can ever be risk-free – the market simply doesn’t work like that - the returns tend to be more attractive, compared to other types of ISA.
Your capital is not covered by the Financial Services Compensation Scheme, but we have full authorisation to trade as a P2P platform from the Financial Conduct Authority (FCA). You need to be willing to take a chance, but with easyMoney we feel that our reputation is solid. Further, we’re pleased to report that no one has ever made a loss through investing via our platform.
If your pension provision lacks future planning, an IFISA (Innovative Finance ISA) could help to fill in the gaps.
An IFISA with easyMoney – your at-a-glance guide:
- easyMoney will create a diversified portfolio of P2P loans vetted by our credit committee and backed by UK property.
- The businesses who borrow from you are property professionals needing fast, flexible loans over 3 to 24 months.
- You can sell your stocks and shares ISAs and transfer the cash, or effect a straightforward transfer of any cash ISAs you may have, should you so wish.
- Our target rates are 3.67-8% p.a. That’s up to 8% of the sum you invested via easyMoney (depending on how much you invest) – simply for doing so. There’s no effort on your part, and you can see how things are going 24/7.
- Interest is paid monthly. Draw funds down to your bank account, or re-invest, whatever works best for you.
- There’s no fixed term. You can ask to withdraw your funds any time, although we can’t guarantee instant access.
- You don’t have to think ultra-big: you can invest as little as £100 with us.
- Did we mention that there’s no tax involved? It’s worth repeating: all your interest will be returned to you tax-free, depending on your tax status.
- We believe in treating our customers fairly, with transparent policies and responsive customer service for any queries or concerns you may have.
- (Bear in mind, this ISN’T a cash savings account, and of course, property is subject to the ups and downs of market conditions, so returns can’t be guaranteed.)
- It’s in our name: getting started is easy. Just click on the link here.
Other Possible Benefits for the Over 60s
Investing in an Innovative Finance ISA could help to boost your pension and make more of it, with potential returns to increase your “pot”. You’re in effect increasing your tax allowance – at least that’s how you could see it. Income below £12,500 isn’t subject to tax, so the interest you gain from your tax-free IFISA adds to that threshold. It’s not rocket science, and you don’t have to be an expert in finance. Just do your research to find the most suitable IFISA provider; the one with the right level of expertise, and that you feel you can trust.
In our view, planning for the future can never start too early. Consider where you are now, and how you’d like your life to look like when you stop working. There are many investment options out there, and easyMoney would be pleased to discuss how P2P lending via an IFISA could work for you.
easyMoney is not a cash savings account. You may not get back the full amount you put in. Your capital is at risk if you invest. Peer-to-peer investments are eligible for an Innovative Finance ISA which is not a Cash ISA. They are not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated in property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice.
easyMoney is the trading name of E-money Capital Ltd, a company incorporated in England & Wales. Registered office is 5 Fleet Place, London, England, EC4M 7RD (Company No. 04861007). E-money Capital Ltd is authorised and regulated by the Financial Conduct Authority (FCA) #231680.