Current Account Turnover (CATO) data

Thanks WestonKev for your quick reply.

I take the point that the data is backward-looking.

I had imagined that the CATO data might give an indication of whether a potential borrower was sailing close to the wind with his existing commitments.

Although the full data is only available to BBA members, it is good to know that Ratesetter have some access to the income verification tool .

Thanks again for your interesting insights WestonKev. I can't imagine the banks giving the public this level of detail on their lending policy. I seem to remember reading somewhere that bank bad debt rates run typically at about 3 to 5% , and are quite a bit worse than P2P. (Don't have a source for that other than Wikipedia on their P2P page.) Maybe P2P providers take greater care with the data they have available !

Surely a "current account turnover" would include items such as bouncing money between different investment accounts, pulling funds in and out of savings accounts to aid cashflow, payments made to re-imburse company expenses, and other non-income items.

Except for the most passive users, it would generally be much higher than income. In my own personal case, I'll often be moving funds through the current account totalling several times my monthly income... albeit an account with a bank that, last I checked, didn't supply data about current account usage to the credit reference agencies. In any case, the phrase "surprisingly modest of their higher true income" suggests that RS falsely believe CATO to be a measure of "true income"!?

james, nice email, although one small error on your chances of approval. Our underwriting process has the IP and email address of all forum members. Anyone that has ever "liked" a westonkevRS post is a given an extra 1,000 credit rating points!

westonkevRS

Surprising that only five forumites have registered for the extra credit rating points! You never know when your circumstances might change for the worse.

I admit that I am a severe underperformer compared to that and in my defence offer the observation that in the coming year I anticipate my sadly lacking level of borrowing to still make me almost enough money to live on.

Pensions are just a tax wrapper and I trust what I can put into pensions. What's the difference between the same P2P loan outside any tax wrapper, inside an ISA or inside a pension? Just the access rules and better tax treatment inside the ISA and pension. You can't do the ISA today but you can do the pension if you have a big enough pension to make the fixed costs worth it and otherwise qualify for the pension concerned.

The tax advantage of a pension isn't alleged. In the P2P case you get to keep 100% of the P2P interest until you take money out of the pension. You get the compounded growth on the part that would have been taken as tax. Then 25% of it is tax free and the rest taxed at the appropriate rate. That appropriate rate can today be zero up to the personal allowance and zero for those who are resident in Portugal.

On some of my basic rate work income I'm even getting tax benefit of 40% income tax plus 12% basic rate range NI saving plus 6.9% employer NI split, a total of 58.9%. That's because I'm salary sacrificing in the basic rate range but the non-work income is still in the higher rate income tax band. Not an insubstantial effect when non-work income might be as say £10,000 a year. How does getting say £10,000 into a pension for a net cost of £4,110 look to you? Given that I can take out £2,500 tax free in a few years than pay at most 20% income tax on the rest if I've retired before taking it. That's £4,110 paid in to get £8,500 out. Plus whatever I can make in P2P or other investing while the money is inside the pension. A pretty nice deal.

Consider a person who retires early and has their income mostly coming from P2P inside ISA, VCT tax free dividends and pension. With much of the money coming from the non-pension part the whole personal allowance can be available for the money coming out of the pension, making it tax free and the pension tax relief and its compounding on interest over the year a pure tax gain.

Or consider a person who today has retired and has an income well below the personal allowance. They can put £2880 into a pension and a few weeks later once the tax relief has arrived take out £3600 tax free, a pure gain for them of £720 a year, every year until they reach age 75 or the rules are changed.

The potential tax gain for a person well below age 55 is higher with VCTs. That's because you can take the VCT initial 30% tax relief then sell in five years and by another VCT then repeat every five years until you die. At 30% a time, less any capital losses. Along the way you can get as much as 11% tax free income from around half-secured VCT lending or around 10% from nearly 100%. But that tax gain doesn't necessarily make VCTs a better choice, just means that it's possible to get well over 100% tax relief given enough time.