Thanks to our unique loan tranching system, Lenders have the option of limiting their Proplend investment to 50% loan to value. This enables even cautious investors to access every platform loan, providing up to 200% capital cover from the underlying property. For those investing via our flexible ISA, that means 5%+ tax free returns via our customisable Auto-Lend facility.
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“Proplend’s Tranche A loans really hit a sweet spot on the risk-reward scale” (4thWay)
It’s that time of year again when you need to use (or lose) your 2019-20 ISA subscription allowance, before getting a brand-new allowance to use from 6th April. Whatever your attitude to risk, you may not want to commit all your ISA budget for the year to one asset class, and if you decide to invest some of it, you’ll probably look to diversify between different ISA Managers.
Diversification of your ISA portfolio is made more difficult by the HMRC ‘one per type’ rule that limits the number of ISAs for each asset class that you can SUBSCRIBE to in any one tax year. But there are ways and means of still achieving a spread of risk you’re comfortable with (in these persistently low saving rate times) – without breaking any ISA rules.
As we tick over into the new tax year, all funds held in ISAs instantly categorised as originating from previous year subscriptions and are free from any one per type restrictions. And given that we are all free to transfer our ISAs of any type to any provider (in part or full), all of us can re-balance and diversify our ISA savings and investment holdings with as many banks, stocks and shares and peer to peer lending platforms as we like.
We’re convinced that the Proplend flexible ISA is definitely worthy of consideration. Particularly for anyone that’s willing to accept some risk to capital, even where they’re still relatively risk averse. And particularly for those who are hassle-averse and might benefit from flexible-access to their ‘pot’.
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Maximum 50% LTV Investments in Every Loan
Proplend’s Innovative Finance ISA (IFISA) can be invested manually to any tranche or by enabling our Auto-Lend facility to automatically allocate your cash to our lowest risk (maximum 50% LTV) investments only. Tranche A is available for all Proplend loans, whatever their overall loan to value, whatever type of commercial property we have a first charge over and whether it’s a bridge or ‘mortgage’ loan.
Using our Customisable Auto-Lend Facility
With a target rate of 5%+ after fees, our Auto-Lend facility offers ISA investors an inflation-trebling return – tax free. And as there is no additional charge for using the service, Lenders utilising the service receive the full Tranche A for each of the loans they’re allocated to, average Auto-Lend returns (once invested) for 2019 were actually over 7% after fees. That’s just below the 2019 average annualised returns for Tranche A as a whole and around four times the rate of inflation.
Tax-Free, Barrier-Free, Inflation-Trebling, Returns via a Flexible ISA
Flexible ISAs give you the option of withdrawing funds from your pot and returning them before the end of the same tax year. There’s no obligation to return all or any of the funds but any not ‘replaced’ by 5th April will be treated as permanent withdrawals.
When previous year funds are withdrawn, they must be returned to the same ISA provider, if at all. When current year subscriptions are withdrawn, your net subscription is adjusted accordingly, so the withdrawn subscription can go back to the same provider or a new provider without being double counted.
If you subscribe to one Innovative Finance ISA you will still be classed as having subscribed to your one ISA of that type for the year (even if you withdraw all of those subscriptions), but it does give you the option of re-subscribing to another ISA type if you choose – albeit an ISA transfer is usually a better option here.
ISA transfers of current year subscriptions mean the receiving provider inherits the one per type – so you can effectively switch providers of the same type, mid-year. Proplend both facilitates and accepts ISA transfers to other ISA providers and ISA types, without limit or charge.
You can fund a Proplend ISA with partial or full transfers of existing pots, comprising of current and previous year subscriptions, although HMRC does require that where any current year subscriptions are transferred between providers, they must all be transferred together.
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Comparing Different ISA Asset Classes
Like any investment, capital invested in peer to peer loans is at risk. Investing instead of saving to your ISA can offer greater potential returns because of that risk. But after 46 fully repaid Proplend loans and after the recent sale of the securing property for our only defaulted loan to date, no Tranche A investor has ever lost capital or achieved a lower than expected return. The recovery process continues for that first defaulted loan, with Proplend and its representatives still aiming for full payment of Tranche B investors capital.
Meanwhile, it is a common misconception that the Financial Services Compensation Scheme (FSCS) helps protect investors in more traditional Stocks & Shares ISAs from losses as a result of poor investment performance. It doesn’t. Compensation is only available when the provider ceases trading – and P2P platforms have their own protection against this eventuality.
Whilst not protected by the FSCS, Proplend Innovative Finance ISA investors are protected by direct loan contracts between them and Borrowers and (FCA requirement) Backup Service Providers to continue to administer loans and property charges if we were to wind up. Lenders’ cash ‘on account’ with us when not invested in loans is also (FCA requirement) segregated from Proplend’s own funds.
Saving to traditional cash ISAs means little or no risk to loss of capital with FSCS protection in place, but unfortunately the traditional attractive saving rates are a thing of the past. An interest rate that is lower than the level of inflation WILL result in your savings losing value in real terms, and so, even risk-averse savers must seriously consider investing instead. Diversifying across asset types, providers and individual investments to get the right risk-return balance for you is then vital.
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Existing Proplend Investors
Current Proplend ISA investors can see their ‘net subscription’ balances and (previous year) ‘replaceable balance’ totals with us at the top of their ISA dashboard. They will have until 5pm on Friday 3rd of April to replace any funds they want to and top up subscriptions for the current tax year (where they have scope to do so from their overall £20,000 allowance).
Last week we also announced an existing Lender offer inviting our current investors to Refer A Friend during March and April. There’s a bonus for each new investor they refer who invests before 1st May, and one available to those friends (and family), if they maintain their qualifying investments until at least 1st September. Proplenders can do themselves and their friends a favour this spring by recommending a Proplend ISA to invest in during the remainder of this tax year, or to kick off 2020-21.
