Financial experts want the government to allow peer-to-peer lending as an option for SIPP pension investors.
Trade body the Tax Incentivised Savings Association (TISA) is asking financial advisers for their views on the plan before putting the proposal to the government.
TISA’s peer-to-peer working party (P2P) includes representatives from P2P lenders and crowdfunding platforms.
They see issues over tax and adding non-standard assets to the list of SIPP investments as the main stumbling blocks to their plan.
However, the government has recently rolled out innovative ISAs that let savers stake money with P2P platforms.
P2P for small investors
Industry figures show around £10 billion has been arranged by P2P platforms for 170,000 investors, including banks, City firms and institutional investors.
TISA says that from discussions with the Treasury, the government seems keen on P2P as a SIPP asset but is concerned about how to apply tax.
“If P2P stays as a non-standard asset, small investors are being excluded. HM Treasury want P2P to be accessible to the retail investor. If easier, accessible assets are introduced they will be more appealing to a different part of the population,” says TISA.
TISA has launched the consultation to find out the views of advisors, who the body believes are concerned about the risks to their businesses of recommending P2P.
Up to 12% returns
Although the returns can reach between 5% and 12%, the risks are high as P2P falls outside the Financial services Compensation Scheme safety net. This means investors can risk losing all their money if a deal goes wrong.
Kenn Taylor, of consultancy Alpha FMC, sits on the TISA working group. He said: “TISA and a couple of major SIPP providers are making the case to HMRC that they never devised the rules to stop P2P investments so they have become an accidental anomaly which is unhelpful.
“The Tisa workstream is trying to work out how to amend the regulation and legislation to remove these barriers. Nobody really wants to change the Finance Act for fear of unintended consequences of changing the tax rules, where exemptions might open loopholes to illegitimate organisations.
“You can have P2P within an Isa and Tisa’s point, which is a good one, is if you think P2P is a good thing and you allow it within ISAs but not pensions, that makes no sense.”