London and Colonial has hit back at Sipp providers’ comments warning of the dangers of including peer-to-peer lending products within their wrappers.
Last month, FTAdviser revealed around £350,000 worth of Sipp money, across several trustees, has been lent via Ratesetter, all of which came through the non-advised route.
Following this, Martin Tilley, director of technical services at Dentons Pension Management, warned that P2P is an asset class in its infancy and that providers of these vehicles are under a misapprehension.
He said: “I can personally see the opportunities of these vehicles but it’s one of those that looks good to the uneducated and ripe for mis-selling/misunderstanding and even, being unregulated for some being set up as scams.
“Potential disaster in the making and for sophisticated or wise investors only I’d suggest.”
However, London and Colonial, which has a distribution agreement with Ratesetter, has hit back.
Adam Wrench, head of product development at London and Colonial, said: “This is a bit of an alarmist statement and in comparison to what?
“Other unregulated investments such as ‘standard’ third party loans, or perhaps Harlequin Property or other esoteric investments or regulated investments such as EEA life settlements funds, Arch Cru, Keydata?
“We agree that ensuring that the loan is not connected is a risk. However, this risk also exists with ‘standard’ third party loans.”
He added that this is where “careful selection” of the P2P platform is “crucial” and that their lending criteria adheres to HM Revenue and Customs’ rules
“Unsecured loans to third party individuals should not fall foul of HMRC provided there is no ‘connection’.
“For each one of us it is easy to identify specifically which individuals we are connected to. Provided the selected P2P platform can hold this information and use this as part of its lender/borrower matching criteria then this should ensure the loan is not connected.”
Andy Leggett, head of Sipp business development at Barnett Waddingham, previously pointed out that lending money to even an unconnected party could create tax charges if that loan is used to acquire residential property.
In response, Mr Wrench said: “We could see how this would be relevant in relation to secured loans but not unsecured.
“For secured loans that use residential property as security, in the event of a default that residential property would become an asset of the Sipp causing an unauthorised payment. However, in relation to unsecured loans if the loan defaults then this situation would not arise.”
Mr Wrench added that standard third party loans are not regulated either but the “same Sipp providers are more than happy to accept those investments from clients, and sometimes irrespective of whether they have been introduced by IFAs”.
“Of course most financial advisers will not advise on unregulated investments such as loans and property however this sort of investment has been the ‘bread and butter’ domain of Sipps and Ssas for decades.”
To learn more about Peer to Peer lending, and earn CPD, read FTAdviser’s Guide.
ruth.gillbe@ft.com
