Lending Works is revamping its peer-to-peer lending platform to appeal to more pensioners.
The platform will offer four new features intended to benefit those planning to take advantage of the new pension freedoms coming into effect from April.
Lending Works says that more than half of its lenders are aged 55 or older, which indicates a growing trend of peer-to-peer lending as a feature of retirement planning.
The new features
The new features designed to appeal to older investors include:
1. A 1% lending bonus: all new lenders aged 55 or over will get a complimentary bonus of 1% on the money they lend until 30th April.
2. Dedicated account managers: all new lenders aged 55 or over will get a personal customer account manager available by phone and email to help them manage their online lending dashboards.
3. Automated monthly income tool: all lenders will have access to a new automated tool allowing them to draw down a pre-selected amount on a monthly basis from the funds that are being repaid by borrowers, creating a regular source of income.
4. Retirement income calculator: all existing and new lenders will be able to use the Lending Works Retirement Income Calculator, which will forecast how much they could earn by lending their pension savings through Lending Works rather than buying a product like an annuity.
How peer-to-peer lending works
Peer-to-peer websites put savers willing to lend in touch with borrowers that need a loan. Because there's no middle man - in the form of the banks - each side tends to get a much better deal on rates.
This social way of investing money has grown in popularity, as the returns on traditional savings accounts have plummeted.
However, one thing to be wary of is that money invested is not covered by the Financial Services Compensation Scheme (FSCS), which protects deposits of up to £85,000 per individual per institution.
Most peer-to-peer lenders like Zopa and RateSetter have a reserve fund in place to protect lenders from defaults and arrears, but Lending Works also has a unique set of insurance policies which cover against a range of risks affecting borrowers' ability to repay loans, including accidents, illness, death and loss of employment.
Pension savings and peer-to-peer
The new pension freedoms will allow people aged 55 or over to do what they like with their pension savings. Those that don't go for an annuity will be looking for other ways to generate an income in retirement.
When it comes to cash savings, rates are in the doldrums. Right now the top paying easy access account offers just 1.5%, the top three-year fixed rate bond pays 2.6% and the best five-year fixed rate bond offers a return of 3%.
In contrast Lending Works is offering a return of 6% on lending for up to five years or a return of 5% on lending for up to three years. With the 1% bonus available to those aged 55 or over the rates rise to 7% over up to five years or 6% over up to three years.
Even the Government's NS&I Guaranteed Growth Bond (available to those aged 65 or over ) can't compare, offering fixed returns of 4% over three years or 2.80% over one year. However other peer-to-peer websites come a bit closer. RateSetter is offering a return of 6.8% over five years or 6% over three years, while Zopa is offering 5.1% over five years or 4% over three years.
Nick Harding, founding CEO of Lending Works, commented: "We anticipate a lot of demand for peer-to-peer lending from older lenders when the new pension rules come into force. Our new features respond directly to what this important customer segment need, want and value from their personal finance platforms.
"Being an internet company brings many cost and time efficiencies, but many of our customers still value having someone at the end of the phone to answer questions and guide them through the online process. Our dedicated account managers will be on hand to provide this personal support."
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