p2pfan
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Post by p2pfan on Apr 12, 2023 20:29:59 GMT
I've lost a fair amount of money to P2P platforms going into Administration, but not been in a situation thusfar where a P2P platform in which I've invested my IFISA pot/allowance has closed down.
I've got IFISAs in a few P2P platforms, having grown my aggregate IFISA pot over many years, and was wondering what would happen if one or more of them went into Administration?
Then, I would probably end up in a situation, as with the P2P platforms that have gone bust, where the Administrators deviously drag out the Administration process for as long as possible to maximise their earnings, at least 4 or 5 years, and lenders receive little or no of their money back, nor are the investments conclusively written-off.
What happens to one's invested IFISA pot with the closed-down P2P platform in such a scenario?
Does one effectively lose their invested IFISA allowance? (This would be a disaster for me, as I'd lose my £20k tax-free umbrella x many years.)
Is there any option of transferring the IFISA allowance out in such a scenario?
Thank you.
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agent69
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Post by agent69 on Apr 12, 2023 20:47:46 GMT
I've lost a fair amount of money to P2P platforms going into Administration, but not been in a situation thusfar where a P2P platform in which I've invested my IFISA pot/allowance has closed down. I've got IFISAs in a few P2P platforms, having grown my aggregate IFISA pot over many years, and was wondering what would happen if one or more of them went into Administration? Then, I would probably end up in a situation, as with the P2P platforms that have gone bust, where the Administrators drag out the Administration process for as long as possible to maximise their earnings, at least 4 or 5 years, and lenders receive little or no of their money back. What happens to one's invested IFISA pot with the closed-down P2P platform in such a scenario? Does one effectively lose their invested IFISA allowance? (This would be a disaster for me, as I'd lose my £20k tax-free umbrella x many years.) Is there any option of transferring the IFISA allowance out? Thank you. So what happens if you have a S & S ISA that loses most of it's value? I guess the answer to both questions is the same. You lose the money and you lose the historical allowances.
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p2pfan
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Post by p2pfan on Apr 12, 2023 20:54:27 GMT
I've lost a fair amount of money to P2P platforms going into Administration, but not been in a situation thusfar where a P2P platform in which I've invested my IFISA pot/allowance has closed down. I've got IFISAs in a few P2P platforms, having grown my aggregate IFISA pot over many years, and was wondering what would happen if one or more of them went into Administration? Then, I would probably end up in a situation, as with the P2P platforms that have gone bust, where the Administrators drag out the Administration process for as long as possible to maximise their earnings, at least 4 or 5 years, and lenders receive little or no of their money back. What happens to one's invested IFISA pot with the closed-down P2P platform in such a scenario? Does one effectively lose their invested IFISA allowance? (This would be a disaster for me, as I'd lose my £20k tax-free umbrella x many years.) Is there any option of transferring the IFISA allowance out? Thank you. So what happens if you have a S & S ISA that loses most of it's value? I guess the answer to both questions is the same. You lose the money and you lose the historical allowances. Thanks. I take your point and understand the logic. I think it's much more significant a risk with P2P due to the ratio of P2P companies that go bust, compared to the ratio of stockmarket funds that lose all or most of their value. Therefore, it makes me quite nervous of losing the historical ISA allowances I've built over many years.
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Post by Ace on Apr 13, 2023 8:35:08 GMT
I've lost a fair amount of money to P2P platforms going into Administration, but not been in a situation thusfar where a P2P platform in which I've invested my IFISA pot/allowance has closed down. I've got IFISAs in a few P2P platforms, having grown my aggregate IFISA pot over many years, and was wondering what would happen if one or more of them went into Administration? Then, I would probably end up in a situation, as with the P2P platforms that have gone bust, where the Administrators deviously drag out the Administration process for as long as possible to maximise their earnings, at least 4 or 5 years, and lenders receive little or no of their money back, nor are the investments conclusively written-off. What happens to one's invested IFISA pot with the closed-down P2P platform in such a scenario? Does one effectively lose their invested IFISA allowance? (This would be a disaster for me, as I'd lose my £20k tax-free umbrella x many years.) Is there any option of transferring the IFISA allowance out in such a scenario?Thank you. As noted above, the short answer is no. There's no concept of transferring an ISA "allowance". (Well, there is in certain limited circumstances related to current year ISAs, but that's not really what's being discussed here, so I'll ignore that). The concept is really maintaining the funds ISA wrapped status, rather than maintaining the allowance (sorry if I'm being overly pedantic with semantics, but I thought it might help in gaining a clearer understanding). The £20k yearly allowance is a strictly use it or lose it allowance. Any funds in an ISA wrapper are free to grow or shrink without limits depending on the wrapped investment performance. Any poor performance during an administration is no exception to this. Loss of the invested funds is simply that, regardless of whether it was a S&S ISA or an IFISA. You could conceptually see it as the funds still having their ISA status, but a zero value, but that might be taking things conceptually too far. During Administration, as with any ISA, you are free to transfer any cash inside the ISA wrapper to another ISA manager, subject to ISA managers' terms, conditions and potential fees. The administrators can also impose their own conditions. Take Moneything for example. They allow partial transfers out of any capital or interest returned, but they impose a fee (£50) for each transfer, so it's not worth transferring small sums. You can use the isa flexibility feature to withdraw all ISA repayments as they occur, so long as you pay them back in to the platform over the end of tax year boundary to maintain their ISA status. That way you can build up larger sums over time to make a transfer worthwhile. Having read that back, I'm not sure if it helps or not. Let me know if it's the latter and I'll remove the post.
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eeyore
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Post by eeyore on Apr 13, 2023 8:54:01 GMT
So what happens if you have a S & S ISA that loses most of it's value? I guess the answer to both questions is the same. You lose the money and you lose the historical allowances. Thanks. I take your point and understand the logic. I think it's much more significant a risk with P2P due to the ratio of P2P companies that go bust, compared to the ratio of stockmarket funds that lose all or most of their value. Therefore, it makes me quite nervous of losing the historical ISA allowances I've built over many years. I agree, which is why the time I spent on considering opening a P2P ISA was measured in seconds - don't do it! All my ISA funds are in traditional ISAs with the great majority in a S&S ISA with IWeb (part of Lloyds Banking Group). Curious that I never think of "historical ISA allowances" that I'm risking - I just regard my ISAs as a tax-free part of my total portfolio - how many years of PEP & ISA contributions I've made isn't something that bothers me (other than, perhaps, mild regret that I didn't make full use of the PEP allowances way back then).
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p2pfan
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Post by p2pfan on Apr 13, 2023 11:26:24 GMT
I've lost a fair amount of money to P2P platforms going into Administration, but not been in a situation thusfar where a P2P platform in which I've invested my IFISA pot/allowance has closed down. I've got IFISAs in a few P2P platforms, having grown my aggregate IFISA pot over many years, and was wondering what would happen if one or more of them went into Administration? Then, I would probably end up in a situation, as with the P2P platforms that have gone bust, where the Administrators deviously drag out the Administration process for as long as possible to maximise their earnings, at least 4 or 5 years, and lenders receive little or no of their money back, nor are the investments conclusively written-off. What happens to one's invested IFISA pot with the closed-down P2P platform in such a scenario? Does one effectively lose their invested IFISA allowance? (This would be a disaster for me, as I'd lose my £20k tax-free umbrella x many years.) Is there any option of transferring the IFISA allowance out in such a scenario?Thank you. As noted above, the short answer is no. There's no concept of transferring an ISA "allowance". (Well, there is in certain limited circumstances related to current year ISAs, but that's not really what's being discussed here, so I'll ignore that). The concept is really marinating the funds ISA wrapped status, rather than maintaining the allowance (sorry if I'm being overly pedantic with semantics, but I thought it might help in gaining a clearer understanding). The £20k yearly allowance is a strictly use it or lose it allowance. Any funds in an ISA wrapper are free to grow or shrink without limits depending on the wrapped investment performance. Any poor performance during an administration is no exception to this. Loss of the invested funds is simply that, regardless of whether it was a S&S ISA or an IFISA. You could conceptually see it as the funds still having their ISA status, but a zero value, but that might be taking things conceptually too far. During Administration, as with any ISA, you are free to transfer any cash inside the ISA wrapper to another ISA manager, subject to ISA managers' terms, conditions and potential fees. The administrators can also impose their own conditions. Take Moneything for example. They allow partial transfers out of any capital or interest returned, but they impose a fee (£50) for each transfer, so it's not worth transferring small sums. You can use the isa flexibility feature to withdraw all ISA repayments as they occur, so long as you pay them back in to the platform over the end of tax year boundary to maintain their ISA status. That way you can build up larger sums over time to make a transfer worthwhile. Having read that back, I'm not sure if it helps or not. Let me know if it's the latter and I'll remove the post. Thank you for this all the posts by everyone above. All very insightful. You're certainly not being pedantic. It's important to be clear with the nomenclature. HMRC are very precise with what they do and do not allow, and we need to be the same. It's interesting to read the example of Moneything, in terms of how they are managing their ISAs during administration. What has happened with other P2P platforms gone into Administration where people have held IFISA-wrapped investments? In the case of Administrations, on top of losing the 'value' of one's ISA holdings, I'm also highly apprehensive about whether Administrators will be amenable to allowing ISA transfers out. They're not the most efficient or reliable of people as it is, and I'm wondering if they are likely bother to do whatever paperwork is necessary to allow ISA transfers out of the firm they are managing the Administration of? As eeyore says, it's maybe wiser to keep one's ISA holdings in Stocks and Shares ISAs, where there is very little risk that long-standing, well-known, well-capitalised funds one invests in such as Fundsmith, or platforms like Fidelity or Hargreaves Lansdown that one may utilise, will suddenly go into Administration?
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rocky1
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Post by rocky1 on Apr 13, 2023 12:26:18 GMT
i personally have never trusted any p2p platform with my ISA funds or allowance.is IFISA funds just thrown in to all loans that the platforms promote ?.do platforms really have the expertise to manage these funds? with delays,extensions,receivers,administrators and some very clever borrowers/platforms the actual losses end up taking years to come to a head.lending in self select loans is one thing,throwing £20k a year at the platform is another. S&S has its own risks but over the last 30+ years has always pulled back and i would rather wait 5 years for any recovery there where you can see what is going on than look at updates from platforms/borrowers that go on for years until most of your funds are eaten up and gone. sorry just how it seems to me and after the last few years i am glad i have stuck by my instinct on this at least.
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ilmoro
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Post by ilmoro on Apr 13, 2023 12:43:14 GMT
i personally have never trusted any p2p platform with my ISA funds or allowance.is IFISA funds just thrown in to all loans that the platforms promote ?.do platforms really have the expertise to manage these funds? with delays,extensions,receivers,administrators and some very clever borrowers/platforms the actual losses end up taking years to come to a head.lending in self select loans is one thing,throwing £20k a year at the platform is another. S&S has its own risks but over the last 30+ years has always pulled back and i would rather wait 5 years for any recovery there where you can see what is going on than look at updates from platforms/borrowers that go on for years until most of your funds are eaten up and gone. sorry just how it seems to me and after the last few years i am glad i have stuck by my instinct on this at least. IFISA funds are invested no different to standard funds on a platform largely as most platforms offer the same products across both types. Up to lender whether they go for auto or manual. Main issue is there is no loss relief on ISA funds so losses cant be offset.
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rocky1
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Post by rocky1 on Apr 13, 2023 13:33:20 GMT
so even less attractive to trust p2p fintech platforms with your ISA funds.just my opinion.
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Post by overthehill on Apr 13, 2023 16:35:10 GMT
I've done the exact opposite.
I wanted my funds with the highest paying interest in ISAs i.e. P2P not FSCS savings.
I haven't invested in any P2P company which charges for outgoing IFISA transfers and losing or giving up ISA allowance hasn't bothered me too much as a new 20k a year has been ample for me.
I haven't faffed about trying to protect my ISA allowance with assetzcapital, fundingsecure, lending works, ablrate as I was focussed on finding the exit before the fire really took hold.
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Post by Ace on Apr 13, 2023 16:55:35 GMT
OK, I understand that there are concerns about using one's ISA allowance in IFISAs, namely: - Concerns that the platform will go into administration.
- Concerns that there might be losses that would otherwise qualify for loss relief if not ISA wrapped.
Both are obviously valid concerns, but someone on a P2P forum needs to play devil's advocate to all the doom and gloom. So...
The following is just my personal opinion. I accept that the forecast elements could be wrong, but here goes...
I feel that concerns that platforms will enter administration in future is overblown. The worst have already been weeded out. If particular platforms give cause for concern, then give them a wide berth. There are plenty of platforms out there that have proven themselves over many years, including through the Covid pandemic. Most are already profitable with remarkably low loss rates. I'd say that there was a greater chance of platforms going institutional only or being bought-out than there is of them going into administration.
S&S investments do suffer losses too, and they don't all recover. Some companies go bust. These tend to have little effect if investing in a well diversified fund, like a world tracker, but so do losses in a well diversified P2P portfolio.
It should be expected and accepted that some P2P loans in a diversified portfolio will suffer losses. This is fine so long as the overall result is a decent net profit.
Over the 5 years that I've invested in many IFISAs. Only 1 of them would have had a better result due to loss relief outside of an IFISA, and then only in one of the 5 tax years. No surprise as to the culprit, it was ABLrate in the last tax year. And yes, I'm expecting further trouble there, though around 20% of that ISA has already been repaid and transferred elsewhere, and another 10% is almost certain to follow (pea one). I'm unsure how the rest will go.
Despite ABLrate, the P2P half of my portfolio has outperformed the S&S half so far. I originally expected the two halves to perform roughly equally over the long term (about 7% XIRR), but I now expect my P2P to outperform my S&S investments long term. And the P2P half has had a far smoother ride (far fewer swings). I'm aware that ABLrate could still potentially prove a lie to the above over the short term, but even this specter has steadily reduced over the past year, and won't in itself be able to substantially effect the long term performance.
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p2pfan
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Post by p2pfan on Apr 13, 2023 20:50:54 GMT
Thank you for all the wise words folks.
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p2pfan
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Post by p2pfan on Apr 13, 2023 20:54:57 GMT
i personally have never trusted any p2p platform with my ISA funds or allowance.is IFISA funds just thrown in to all loans that the platforms promote ?.do platforms really have the expertise to manage these funds? with delays,extensions,receivers,administrators and some very clever borrowers/platforms the actual losses end up taking years to come to a head.lending in self select loans is one thing,throwing £20k a year at the platform is another. S&S has its own risks but over the last 30+ years has always pulled back and i would rather wait 5 years for any recovery there where you can see what is going on than look at updates from platforms/borrowers that go on for years until most of your funds are eaten up and gone. sorry just how it seems to me and after the last few years i am glad i have stuck by my instinct on this at least. IFISA funds are invested no different to standard funds on a platform largely as most platforms offer the same products across both types. Up to lender whether they go for auto or manual. Main issue is there is no loss relief on ISA funds so losses cant be offset. I never knew this! So, if a P2P investment wrapped in an IFISA goes pot (either the borrower doesn't pay back or the platform closes down, never to redeem), one can't offset that loss against profits on other P2P investments? That loss relief is one of the massive advantages of P2P lending versus other forms. If it's not possible for P2P lending IFISAs then it is a deal breaker. It's a major 'no' to using my ISA allowance for P2P investing compared to using it for a very diversified stockmarket fund.
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ilmoro
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Post by ilmoro on Apr 13, 2023 21:15:28 GMT
IFISA funds are invested no different to standard funds on a platform largely as most platforms offer the same products across both types. Up to lender whether they go for auto or manual. Main issue is there is no loss relief on ISA funds so losses cant be offset. I never knew this! So, if a P2P investment wrapped in an IFISA goes pot (either the borrower doesn't pay back or the platform closes down, never to redeem), one can't offset that loss against profits on other P2P investments? That loss relief is one of the massive advantages of P2P lending versus other forms. If it's not possible for P2P lending IFISAs then it is a deal breaker. It's a major 'no' to using my ISA allowance for P2P investing compared to using it for a very diversified stockmarket fund. No. Loss relief usually requires something to be subject to tax ... so anything held in an ISA be it P2P, stocks, funds, bonds isn't eligible for either income or CGT relief.
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eeyore
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Post by eeyore on Apr 14, 2023 9:18:59 GMT
On the other hand, it's not all perfect in the S&S world - S&S platforms including those offering ISAs do fail regularly - I had investments in an broker, SVS, which went into administration a few years ago and it was two years before the bulk of the investments were returned. But the difference between P2P and S&S was stark - cash in the accounts and the cost of administration (up to £85k) was guaranteed by FSCS and the whole administration was overseen by the FCA, indeed it was the FCA which was monitoring the broker's activities and proactively forced SVS into administration; the other major difference is that the investments held on the broker platform are transferable assets - at the end of the administration, I had the same investments just on a different broker platform and it cost me nothing in cash terms, only the worry and inconvenience. In the P2P sector, the underlying investments, loans to borrowers, have to be recovered by the administrators (taking their expenses out of whatever gets returned), so the likelyhood of a loss is much greater.
As regards the objective of investing in an ISA, subject only to the government's tax regime, I envisage a fifty-year lifetime for my S&S ISAs - their purpose is to provide an income stream from dividends to augment our pensions to allow my partner to pay the fees for a *comfortable* care home after I've gone. I'm confident that the big S&S ISA platforms have the procedures and staff to manage smoothly the transfer of funds from my ISA to my partner's - I doubt that the P2P platforms have that much experience, indeed I don't have the level of confidence that P2P will be around in the time scales I envisage and certainly not that any individual platform that I could invest in now will survive in the long term.
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