Exiting P2P

Looking at the four "double digit" platforms I lend with, SS typically have 2000 active lenders per loan, MT perhaps 1000, FS and ABL in the hundreds. Versus a UK population of 50 million or so adults, I don't think ALL grandmas and cats have yet climbed on board these ones (although the avatars here show they ARE represented!).

What worries me more than these double digit asset-secured platforms are others that now churn out unsecured SME loans at 6/7/8%, and those who used to offer decent double digit secured lending but now find themselves able to fill much the same loans at 8 or 9%. There's a standard life cycle for P2P platforms and I only remain involved until the point they get greedy and go "mass market" 

The places I linked to found positive results from using it over shorter periods than that though it certainly isn't a short term tool, meaning say under a year, and it's just probabilities not saying when things will happen, as illustrated on page 21. So while I can join others in saying expected returns are lower now, that still doesn't mean that say the S&P 500 can't double in price first! It can and might well do that. It's just not the way the odds point at the moment. The pension-side aspects are in part about reducing the sequence of returns risk at the start of retirement when drops are particularly important and the fairly simple rules used by Guyton did that and improved results with short term decision making once a year.

Yes, that's pretty common. The catch is how to get out before the drop happens while taking the gain. Stop loss orders and ETFs would be one potential way for those with a fairly short term view to try it. Plenty of other ways.

I think that SteveT perhaps has it better and to some extent it's about the life cycle of a platform. Yet while I don't think P2P as a whole is in a bubble, I do think that over perhaps 5-10 years the potential gains will end up lower overall. At least, that's my expectation. Won't stop me exploiting the opportunities while they seem to be around, though.

Yet today, P2P offers an almost cost-free way to get out of high equity weightings. Returns from the higher paying platforms are likely to be higher than the long term averages for both the UK and US markets, IMO, meaning 5-6% plus inflation for those two. So it's currently looking like a really good risk reduction tool. Will it be as viable in say five years? ten? Less prospect of that IMO. And if we do see big equity market drops I'll undoubtedly be switching back into equities after the drops: I'm after avoiding being in the market for those while not paying a large return penalty, not long term having low equity weights. So while lots of people are piling in and afraid of equities I'l be doing what I did back in 2008 and early 2009 and going heavily into them again. (shrug) At least it should make for good liquidity for the money I'll be removing from P2P.

Well, not so sure you need an excuse to stay in, but may need no excuse to change weighting between different platforms. I've effectively abandoned a couple (Zopa low returns and Bondora not seeming trustworthy or reliable and reduced returns) and eliminated another during diligence (Saving Stream, didn't seem trustworthy enough to me). I'm still looking to head to around 75% - a few hundred thousand - in P2P but looks as though for a while I'll be inhibited by not being able to do it directly with pension money and might be stuck around 150k. The joys of a 60% plus savings ratio and nice income...

Could you kindly expand on the CGT points you mention? Are there specific platforms? 

See this post for a summary of those I know about. If there is a premium possible in secondary trades then either it'll be tax exempt gains, if simple debts, or using CGT allowance otherwise. Some other tax free or exempt things are listed here. If anyone has information on other platforms not currently listed in the first post I'll add them.

Ablrate, MoneyThing still increasing, looking into selecting another one or two, currently reading up on Collateral because of the pawn loans there and their diversification value. Still have money in Zopa, not much, and Bondora, just running down those loan books naturally as loans end now, having done all of the Bondora selling I plan to do except, perhaps, for defaulted loans.

Not P2P but I'm also adding to VCT as now usual for me to eliminate most of my income tax cost and making pension contributions this year that I expect to be more than 100% of my base pay, with non-base things meaning my employer is still paying me a bit over minimum wage. I'm not far from being able to take money out of pensions and my current plan is to do the 25% tax free lump sum about as soon as I can and put the money into P2P. Pensions are in part positive due to having unused annual allowance from three years ago to either use or lose and knowing that if I'm still working I'll end up limited to the pure annual allowance only in two years.

The FCA recently decided that money that has ever been taken out of a pension will no longer count towards the high net worth capital requirement, with no end date given for it, so perhaps my whole life. Since I want to add that to the sophisticated investor (by investments) qualification that's a negative point for me and makes VCT investing somewhat interesting even beyond what I do now. But since I might relocate out of the UK and get all pension money out tax free the pension still wins for now. All tax free involves a place with a tax treaty with the UK that says income is taxed in country of tax residence and picking a place with low income tax rate, like the 0% Portugal scheme you can opt in to. the pension 75% is income so included in that. If you do this and aren't already out of the UK you'll need to stay out of the UK for five years or be taxed on it in the year of your return.

I've already exceeded my base retirement income/pot target, I'm now working to accumulate funds to allow me to choose where to live via investor visas if I wan to do that. Target was median income (circa 18k originally) using modern drawdown rules with at least 95% confidence level on things like cfiresim and without income going below £12k even in sustained bad investment returns cases. I would have to anticipate sustained bad returns if I was to retire today, see the PE10 discussion for why. Except I'm "cheating" using P2P since this opportunity is there. But at any time I could just retire now if I wanted to. My non-work investment income is already close to the 18k level even without any pension money involved. Courtesy of some nice VCT dividends and P2P interest.

Thanks for the information and your opinion. When I first got into P2P I quite liked the idea of lending to businesses and doing something economically useful with my money and I looked at Funding Circle. After doing some research I concluded that unsecured loans to LTD companeis was just too risky so went down the Zopa/RateSetter personal loan route. I have certainly be able to earn a reasonable return on my savings this way without having to do any work, I will take a look at the loans you mentioned and think about putting some investment in. I dont mind lending to legitimate businesses, my main concern is fraudsters using assets that they dont own to secure further loans - has there been any examples of this happening?