SIPP holders face additional charge for P2P investments
Self-invested personal pension (SIPP) holders are being charged more to invest their SIPP money into peer-to-peer lending platforms, as it is classed as a non-standard asset that requires more due diligence.
John Dowding, technical director at Morgan Lloyd, told Peer2Peer Finance News the SIPP administrator has an additional charge for its clients that invest in P2P.
“This covers the additional admin and due diligence that is required for these types of arrangements,” he said.
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“The regulatory capital and risk increases pro rata to the size of the investment hence the tiered charge.”
This effectively makes it more expensive to invest in a P2P SIPP, as it is only economically viable if a large investment is being made.
Read more: Which P2P platforms offer SIPPs?
Dowding said Morgan Lloyd offers a free SIPP where all investments are on its own platform or a low-cost SIPP where other platforms and standard assets can be held, which is charged between £150 to £350 per annum.
However, Dowding said the SIPP administrator’s typical charge for P2P investments, which is classed as a non-standard asset, is 0.35 per cent on the first £500,000 and 0.25 per cent on anything above £500,000, subject to a minimum of £1,350 per annum.
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A SIPP is a personal pension tax wrapper which people can pay into and use to manage their investments flexibly in a tax-free environment. They can contribute up to 100 per cent of their annual earnings, with tax relief applying on contributions of up to £40,000 per year, with no capital gains or income tax.
The concept was first introduced in 1989, but P2P platforms were only allowed access to the scheme in 2016. A number of platforms now accept P2P investments through SIPPs, including CrowdProperty, Proplend, Money&Co and Ablrate.