However, while participants in the P2P industry are assured of this fact, we waited with anticipation for pensions freedom to come into effect. Would the release of funds spread as far as P2P? Would pensioners be prepared to try something so ‘alternative’ as alternative finance?
Given that we’re now four months into the freedoms, we thought it an opportune moment to conduct some data analysis from within.
The results unearthed a significantly positivetrend in terms of lending capital. Those of pensionable age are bucking the generalisation. They won’t be daunted by seeking out alternative places to grow their retirement finances, and are enthusiastic to look beyond the traditional options.
What we hadn’t bargained for, however, was how instructive the pensions freedom would be for us as a platform. Rather than simply arriving through the door as happy, grateful customers, pensioners are teaching us a thing or two by voting with their feet.
What our pensioners are telling us
Already there has been a significant shift towards peer-to-peer lending in terms of investment. At Lending Works alone, we’ve seen the amount lent by those over the age of 55 double since 6 April. Prior to 6 April 2015, the share of funds lent by the over 55swas around 35% of the total funds lent. However, more than 70% of new funds since this date have come from these ‘silver lenders’.
Other statistics echo this significant upward shift too. Those over the age of 55 made up just under half of our lender base prior to 6 April. In the months since, 58% of new lenders in that time havebeen of a pensionable age. In addition, the overall average lender age has shifted from 51 to 55.
However, the results above serve merely to confirm what we had suspected. It was another set of findings which we found more surprising, and gave us great insight into the psyche of the silver lender.
In the build-up to the pensions freedom, we embraced it as a period of education in terms of understanding what this demographic of customer deems important. Among some other detailed feedback we received, it emerged that the sense of ‘lock-in’ associated with annuities was one of the main reasons for their lack of appeal – rather than simply the declining rates of return.
Such a finding largely inspired our launch of a monthly income tool, which gives lenders the option of taking repayments from borrowers as an income direct to their bank account.It went live in the second week of April, and the take up of thisfeature from silver lenders since has been truly substantial. Over three quarters of new older lenders are opting in, and a third of existing silver lenders have liked the idea, logged in and switched over to start benefitting right away.
It all points to a preference for more flexible investing, combining an element of controlwith the absence of an obligation to wholly lock capital away – features which annuities aren’t renowned for. Indeed, incoming legislation will mean annuity holders can sell up from April 2016, but this will be a complex process in itself.
The importance of safety
Safety will always be the number one priority for Lending Works. We believe in its importance and our customers absolutely demand it.We conducted a recent poll in which we asked our lenders to identify the most important reason behind their choice to lend with us. Significantly, four out of five of our older lenders make safety their top priority, above flexibility, platform usability and even rates of return.
Yet P2P does carry its risks and it is not a guaranteed income generator like a standard, steady, tried-and-tested annuity.We mustn’t rest on any laurels and forget that.As fast as pensioners voted with their feet in our direction, they will leave if the level of protection and security we offer is allowed to slip.
Are we still ‘alternative’?
FCA regulation hasgiven the credibility of the P2P industry a massive boost, and the fact that a new Individual Savings Account dedicated to alternative finance will be launched next spring resoundingly underlines the continued commitment from Government to help the sector flourish. With these huge endorsements, the scene is set to attract these valuable silver lenders as much as ever to alternative finance.
But is that word – alternative – overused or redundant? After all, P2P lending is being used by thousands of borrowers and lenders every day, and continues to surge into the mainstream.
Yetas it does, it is imperative that platforms across the board fight against anything that could corrupt our creativity, limit our agility or hasten the course to homogeneity – be that complacency or ill-suited regulation. Peer-to-peer lending was born out of a desire to put personal finance back into the hands of consumers. Just because it has been around for 10 years and has already facilitated over £3billion in lending, it doesn’t mean P2P can’t still learn and adapt.
And what better people to take direction from than savvy, experienced, mature personal finance handlers? After all, such customers have spent their entire lives building their nest eggs – it’s now our responsibility to deliver platforms which earn the right to help them grow.
