New P2P & crowdfunding platform review service for member-directed pension scheme operators

• Platform review service created in response to increasing demand for reviews on P2P & crowdfunding platforms
• Designed in collaboration with industry leading platforms and tailored to requirements of SIPP & SASS operators and institutional investors
• Pension changes announced in Budget expected to increase popularity of P2P and crowdfunding investments

A new Peer to Peer lending (P2P) & crowdfunding platform review service from SIPP Investment Platform has been launched in response to growing demand for reviews from SIPP & SASS operators and institutional investors.

Designed in collaboration with leading figures in the P2P and crowdfunding industry, this robust and comprehensive review covers all relevant aspects of a P2P or crowdfunding platform.

Alan Sheehan, Technical Manager at SIPP Investment Platform commented: “As interest rates remain frozen at 0.5% the P2P lending and crowdfunding industries have expanded as investors look for alternatives to traditional savings options. P2P and crowdfunding platforms have proliferated both in the UK and abroad, and although they are often considered collectively, the due diligence required on each is markedly different. Over the last 12 months we have seen a significant increase in the number of requests from our subscribers to review these platforms and, given the complexity involved, we have created something fit purpose – with 180 different criteria considered.”

To help SIPP & SSAS operators decide if a P2P platform meets their particular criteria, the analysis is divided into seven key areas:

1. Loan specifics: Analysis of the loans and loan parts, their returns and fees
2. Liquidity: Analysis of the conditions attached to the loans including early repayment, redemption, cancellation and transfer plus a summary of the secondary market
3. Security: Examining the security attached to the loans plus the platform operator’s assessment procedures on potential borrowers, default, late payment and provision fund analysis
4. Parties: Review of the platform operator and any ongoing counterparties, including their provenance, experience and regulatory record
5. Continuity: Review of the platform’s business continuity and disaster recovery plan
6. Compliance: Review of the platform operator’s regulatory compliance, including high level controls, CASS compliance, AML, capital adequacy, client reporting, promotional material and complaints procedures
7. Taxation: Research into whether investing via a member-directed pension scheme may lead to tax charges through unauthorised payments, taxable property or otherwise

The analysis for crowdfunding platforms is similarly divided. In addition to a review of the parties, business continuity plan, the firm’s regulatory compliance and any taxation implications as above, the focus is also on the due diligence process on investee companies, how valuations are arrived at,the remuneration model of the platform and any initial or ongoing support provided to investors and SIPP & SSAS operators. Given the long term nature of these investments their liquidity can be crucial, as can the ability to obtain ongoing valuations.

Changes to the Lifetime Allowance due to begin next year and a reduction in pension tax relief for higher earners announced in Wednesday’s Budget is likely to increase demand for these reviews. The size of the annual allowance will be gradually reduced from £40,000 to £10,000 for those making between £150,000 and £210,000 a year. The standard pension lifetime allowance (LTA) will also be reduced from £1.25 million to £1million from 6 April 2016.

Alan Sheehan commented: “With the Chancellor’s announcement of a tapered reduction in pension tax relief for higher earners, pension investors will be looking for ways to do more with less. The higher interest rates that P2P platforms can offer plus the potential for high growth from Crowdfunding Platforms can be attractive, but there are so many in this crowded marketplace that SIPP & SSAS Operators and institutional investors may struggle to distinguish the right option for them. Our platform review service not only helps them to make a more informed choice, but also provides the audit trail they need to meet their compliance obligations.”