Regulation  

Treasury urged to clarify law to allow P2P in Sipps

Treasury urged to clarify law to allow P2P in Sipps

Peer-to-peer lending platform RateSetter is calling on HM Treasury to clarify the law to allow such investments within a self-invested personal pension.

The Financial Conduct Authority recently expressed concern that letting savers use their pension money to invest in peer-to-peer might shift the customer base towards investors who are less experienced or knowledgeable and might not fully appreciate the risks involved.

Speaking to FTAdviser, P2P platform RateSetter’s head of investor operations Ceri Williams questioned why P2P is not available through a mainstream Sipp wrapper, when it has already been approved for Isas.

He pointed to the ‘connected parties’ rule, formed to prohibit connected individuals benefitting from tax breaks by transferring assets to each other, which he said was the only “stumbling block” that prevents P2P from becoming an authorised investment within a Sipp.

Mr Williams said the legislation was “perfectly sensible” to prevent abuse of tax incentives, but because the rule was created more than a decade ago, before the P2P sector was established, it was now looking “strained”.

“We are now looking for clarification on something which was never intended to catch this kind of legislation.”

Mr Williams said it was “undeniable” the FCA has been supportive of the P2P sector, but talks with the Treasury about altering the legislation had so far proven fruitless.

“The Treasury has shown very little interest,” he said, adding RateSetter is looking to find a way to put it through secondary legislation, to speed up the process and avoid the need for an act of parliament.

He pointed out RateSetter is an “anonymous” platform, meaning investors do not choose, or even know, who they are lending to, making it “virtually impossible” to be faced with a connected parties issue.

RateSetter is working with four Sipp trustees who Mr Williams said recognised this collusion issue was not a problem. It already has 50 active Sipps open on the platform, amounting to around £3m in assets, all of which have been set up over the past year.

So far it has been smaller Sipp schemes that are comfortable with the concept, with Mr Williams adding larger schemes are nervous about the “remote possibility of collusion coming to light”.

“Within a standard Sipp wrapper, many of the assets are earning next-to-nothing.

“Peer-to-peer is quickly becoming more mainstream, so it’s only sensible for the FCA to look at the regulation and perhaps makes some tweaks; but it has to be seen in context.”

But Matthew Harris, IFA and owner of Dalbeath Financial Planning, called on the regulator to ban investments like P2P loans from being held within pension funds.