THE AMOUNT of investor money covered by Zopa’s provision fund has fallen from almost half to just a quarter in less than six months.
The peer-to-peer lender announced in May that it would be winding down its Safeguard fund to allow investors to access higher returns.
At the time the platform said 46 per cent of investor money was covered by the safeguard fund, but an update at the end of last week showed only £700m of its £2.7bn loanbook now had the coverage, amounting to 25 per cent.
Zopa, which gained full authorisation from the Financial Conduct Authority in May, is retiring the Zopa Access and Classic accounts on 1 December and introducing Zopa Core, which will remove the safeguard fund.
“In many ways, Core and Classic are pretty similar – the same sort of loans in the same risk markets, with the same expected default rate and the same one per cent loan sale fee – but, as it’s without Safeguard, Core operates slightly differently and offers higher expected returns after losses,” Andrew Lawson (pictured), Zopa’s chief product officer, said.
“Lending without Safeguard also means that the way you receive your returns may be a little different.
“The returns you see coming into your account each month may be more changeable in the short term, though, on average and over time, there is a higher expected rate of return.”