Investing

Post about boosting your funds through investment. Includes both traditional and non-traditional investment opportunities.

January 14, 2019

Guest Post: How to Guarantee Financial Security Whenever You Retire

Nick Making Money, Saving Money, Investing guest post 0 Comments

Today I am pleased to bring you a guest post from my money blogging colleague Jennifer Kempson. Jennifer blogs at https://mamafurfur.com.

In her article Jennifer sets out some strategies to ensure you have enough money to enjoy your retirement, even if it’s not too far away!

Over to Jennifer, then…

They say hindsight is a wonderful thing, and truly as we reach the later years of working life and approach retirement, we may secretly wish we had made our retirement resources a priority and regarded them as a key resource to help fulfil our passions and achieve our long-term ambitions.

Money, much like health and energy, is one resource that we will look back on and wish we had taken better care of during our younger days, so we can look forward with pleasure and excitement to when the time-freedom of retirement allows us to do whatever we dream of.

Reading this right now you may feel that it is too late for you to recover your potential financial security for your retirement, but I’m excited to share with you a few ways that you can invest in your future even when retirement is on the horizon in the next 10-15 years.

Make a plan and start seeing it happen!

Firstly, I will say that I am a firm believer in “putting your own oxygen mask on before anyone else”. And the very best investment financially or otherwise you can make for your future is to sort your own financial security as a top priority.

You absolutely need to write down your financial goals and desired experiences for your retirement, and start getting excited about this and be as specific as possible, so that you know exactly how much money you will require to make it happen.

Like time spent with our children and loved ones, if we master our relationship with money and the way we feel about it today, this will have a huge compounding effect on our short- and long-term happiness in future. I talk more about the habits and thoughts that can reshape your relationship with money in my new book, The Master Money Blueprint, which sets out the 26 timeless money principles and habits that I believe can change your financial future.

Pay off your liabilities as soon as possible

One of the most beneficial things you can do for your financial future is to become as debt-free as possible.

Make better money relationship habits starting today and commit to overpaying on everything you have as a liability against your name.

This could include your mortgage or car payments, and is especially crucial if you have credit card debts or loans. Commit to paying these down as quickly as possible and never returning to debt again.

A home with its mortgage completely paid off will provide you with safety and security in future, and when the time comes can be left to loved ones. But more important than that would be the mindset that your home is secure and safe for your happiness both now and in the future.

I like to use a great principle called The 10% Rule, mentioned in more detail in my book and on my blog at www.mamafurfur.com. This can and should be applied to every debt you have – any outstanding mortgage, car payments, loans, etc.

Commit to paying 10% over the monthly repayment required each month as a default. That small action will do two things. Firstly, you will not really notice too much discomfort. For a mortgage of, say, £400 a month, finding a further £40 could be as simple as giving up that gym membership and going for walk with friends, getting some free weights in the house, learning yoga from YouTube, and so on. It could be giving up all the unused packages from cable TV for a few months to see if you really miss it. It could be starting a small sideline business at home to make some extra money, or saving on your food and shopping purchases by eating one less takeaway a week. The choices are limitless.

That action of paying 10% more each month means you will make the equivalent of 1.2 extra payments towards reducing your debts per year. For a 25-year mortgage, for example, this could result in the debt being fully paid off in just over 22 years instead. That is a nearly three years off your home loan from a small change without causing too much stress to your day-to-day living. The second benefit is to your mindset, which is priceless – you will quickly see that money really is a resource to deploy based on your goals and long-term plans. Overpaying then becomes a joy, as much as it might be difficult to see that at the start, but the smallest actions usually do change us for the better when we let them.

You can find out more about how to pay off your mortgage and large loans quickly using my blog post and videos dedicated to the topic here.

Invest using an investment ISA

An investment ISA (Individual Savings Account) allows you to save up to £20k tax free in stocks and shares every year. This type of savings account could allow you to create a passive income to supplement a pension. You can have a cash ISA and an investment ISA if you wish, as long as you don’t exceed the £20k annual total contributions allowance.

Investments in ISAs are not liable for income tax or dividends tax. Neither do you have to pay capital gains tax when you sell them. They are available from most banks and investment companies.

Like any type of investing, we need to purchase funds based on our goals, requirements for the money long term, and our tolerance for risk.

Investment returns are not guaranteed. However, generally you can expect to see a 4% return on your investments if you pick solid mutual funds (collections of stocks purchased together, spreading your money across a wide range of similar companies) such as Vanguard’s LifeStrategy 100% Equity Fund or reliable low-cost index funds such as the S&P 500. It is also not uncommon to see growth rates of an average of 9.5-10%.

At the later part of your life, if you are hoping to use the power of compound interest and the stock market to gain higher returns than a normal savings account, then I strongly advise doing as much research as you can into the funds you decide to pick.

With investments, we need to assume we are leaving them a minimum of 5-10 years before withdrawing the money, and must not let the ups and downs of the stock market test our emotions.

The value of the stocks once we purchase them is only relevant once we need to sell them, so best mindset practices say to ignore the current day value until you absolutely need them.

Another benefit of using an investment ISA is that you will have access within a few days to your money should your circumstances change and you find you need the money sooner.

I strongly recommend every adult has an investment ISA, as it is currently one of the few ways to get high-interest returns on your long-term savings. It could even allow you to build a substantial ‘pot’ that allows you to achieve complete financial freedom for you and your family in future.

I call an investment ISA a passive income source, as the money generated is created by companies returning some of their profits in dividends, and/or the value of the stocks and shares purchased going up.

We do not have to exchange our time for this income, therefore it is completely passive and grows without any effort from ourselves. The beauty of the stock market is that our money will remain active until we choose to sell our stocks, so it will continue to create more income for us in the background. We can simply withdraw a small portion of it each year to live off, and some of the increase will still remain, adding to our wealth total despite the withdrawn money.

Let’s look at some examples of what we could potentially end up with if we took out an investment ISA even with a short-term goal of accessing the money within 10 years. I will use a withdrawal rate (how much we draw from our account every year as a source of income) of 3.75%. This is regarded as a good average by most financial advisors and institutions.

Starting with no savings at all at age 50, if we contributed the maximum of £20k a year to an Investment ISA with a withdrawal rate of 3.75% a year on average and saw only a 4% return on investment, then using the power of compound interest and reinvesting any dividends or growth, we would have at age 60 a total investment pot of around £246k. If we withdraw 3.75% of this a year, as stated above, after 10 years we could withdraw £9.2k a year of interest (tax free). That would mean an extra £800+ in your pocket every month through your investment ISA savings alone.

Leave the amount until you are officially retiring at age 65, after 15 years of consistent effort and contributions, we could see approximately £411k with an income of £15k a year or £1200 in our pocket every month.

If we were to see a 10% return on investment each year, the total fund within 15 years of maxing out our contributions would be approximately £696k and an income of £65k a year tax free! That is probably more than any retirement could use up, and of course this is purely using our investments as a source of income and not including a state or employer pension. That means you could end up being able to use the interest generated from your investments each year to live off indefinitely!

Another great point to remember is that an ISA is per individual, so if you are a couple you can open one each and double your achievements together.

What better gift than your time and freedom back to use as you wish could you give yourself and your loved ones?!

If you would like to know more about the basics of the stock market, or how to use an investment ISA to retire earlier than planned, please check out my blog posts here:

https://mamafurfur.com/blog/investing-beginnersuk/

https://mamafurfur.com/investing/

Master your money and create your best life – your greatest investment in your future!

Make it a priority to learn how to master your money and use it to direct and create your best life.

Successful people in every walk of life leave clues along the way, so however you feel inspired to live your life, do it with style and use money as the tool to get there, taking your loved ones along with you for the ride.

Think of your upcoming retirement as an opportunity to explore new opportunities and even business ideas. Learn as many new skills as you can in areas that make your future life seem exciting, and watch as the world really opens up to you to design the life you always wanted in your retirement.

Here’s to a great future ahead on your terms, with money as an abundant resource to fuel it!

About the author

Jennifer Kempson, aka Mamafurfur, is a 30-something Scottish working mum with a passion to help others create the work-life balance and lifestyle they desire with time and financial freedom, sharing smarter spending, saving and lifestyle strategies.

Outside of her blog, she recently released her first book titled The Master Money Mindset: How to Master Your Money and Create a Powerful Money Mindset, sharing 26 timeless money principles that will allow you to design and shape your future using money as the resource it should be. The book is available on Amazon Kindle and as a paperback now.

Currently voted UK Money Vlogger (Youtube Creator) 2018, and finalist for the UK Blog Awards Finance Blog of the Year 2019.

Many thanks to Jennifer (right) for a valuable and thought-provoking guest post. Please do check out her blog at www.mamafurfur.com and her YouTube channel at www.youtube.com/c/mamafurfur.

I do agree with Jennifer about the value and importance of paying down your debts. Not only will this reduce the capital outstanding, even more importantly it will reduce the interest you have to pay on that capital in future. Other things being equal it’s best to pay off high-interest loans first (though check whether there are any penalties for doing this). Mortgage rates are historically low at the moment so paying extra every month won’t have as big a benefit, but of course there is still much to be said for going mortgage-free as early as possible.

I also agree with Jennifer about the value of saving as much as possible using ISAs. And for long-term saving especially, you are likely to get much better returns from investment (stocks and shares) ISAs than cash ISAs. Do just bear in mind that pension contributions are another great way of saving for retirement, and you get tax relief from the government up front on them.

Finally, I do of course appreciate that not everyone is going to be able to save £20,000 a year into their ISAs. Whatever you can find, however, putting it into ISAs (and pensions) will ensure you get the maximum benefit in years to come. And the earlier you start, the more time your savings and investments will have to weather any ups and downs in the financial markets and grow. You can read some ideas for boosting your income so you can afford to save more for retirement in the Making Money category on my blog.

As always, if you have any comments or questions about this post, please do leave them below.

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November 14, 2018

Are These Windfall Bonds Better Than Premium Bonds?

Nick Saving Money, Investing 4 Comments

Recently I’ve received a number of promotional emails about the Windfall Bonds on offer from the Family Building Society. The emails state, “Our Windfall Bond is a Better Bet Than Premium Bonds”. So I thought I’d take a closer look to see if this claim stacks up.

The unusual feature of the FBS Windfall Bonds is that every month you can win a cash prize, just like Premium Bonds. Unlike Premium Bonds, though, interest is also paid whether you win a prize or not. Interest rates are variable and tied to the Bank of England base rate. Currently they are paying an annual rate of 0.75%.

Each month, every qualifying Bond is entered into a draw for the following set of monthly prizes:

• Ten prizes of £1,000
• Two prizes of £10,000
• One prize of £50,000

As regards your chances of winning, on the FBS website they say:

The breakdown of prizes ensures that each bond has 13 opportunities to win a prize each month – 156 over the course of a year. The more bonds you hold, the greater the chance of winning. Even with one bond, your odds of landing a windfall are 64/1 in the course of the first 12 draws.

How Do Windfall Bonds Compare with Premium Bonds?

The first thing to note is that each Windfall Bond costs £10,000, so that is the minimum investment.

By contrast, the minimum purchase for Premium Bonds is just £100, which is reducing to £25 by March 2019. Windfall Bonds aren’t therefore an option unless you have a fairly sizeable lump sum to invest.

Assuming you do, however, how do the two compare? On the FBS website they say:

Odds of 64 to one are over five times better than the odds of winning £1,000 or more in the course of a year if you invested the same amount in Premium Bonds. And unlike Premium Bonds, the Windfall Bond pays interest, plus there’s no limit to how many Windfall Bonds you can hold.

I am sure that’s true as far as it goes. However, there is a bit more to consider than that.

First of all, Premium Bonds offer lots of smaller prizes than £1,000, including £25, £50, £100 and £500. According to the probabilities calculator on Martin Lewis’s Money Saving Expert website, with £10,000 worth of premium bonds you could expect on average to win £100 in prizes per year.

By contrast, with Windfall Bonds the guaranteed return at 0.75% is just £75 a year. So if you have one of the 63 out of 64 Windfall Bonds that don’t win a prize in a year, on average you will be £25 a year worse off.

Of course, it’s hard to compare the two directly, as the £100 annual return on Premium Bonds is just an average figure. In practice you might earn more or less than this in a year. You might also earn nothing at all.

A further consideration is that Premium Bonds also pay out larger prizes, including two one million pound prizes every month. The chances of winning a life-changing sum like this are extremely low – a mind-boggling 1 in 35,926,766,878 per month for a single £1 bond – but nonetheless every month two people have to win. The top prize with a Windfall Bond is £50,000. That’s still a handy sum, of course, but at just five times the purchase price of the bond it probably won’t be life-changing.

Another thing to bear in mind is that the interest paid on Windfall Bonds is taxable – so if you have exceeded your PSA (Personal Savings Allowance) you will have to pay tax on it at your highest marginal rate. The PSA for basic rate taxpayers is £1,000 and for higher rate taxpayers £500. Additional rate taxpayers (people earning over £150,000 a year) do not receive a PSA.

Under UK law, both Premium Bond and Windfall Bond prizes are tax-free.

Finally, with Windfall Bonds once you have paid your £10,000 to purchase a Bond you cannot withdraw all or part of it unless you close your account, which takes 35 days. With Premium Bonds you can withdraw all or part of your holding at any time, and the proceeds normally go through in just a few days.

Conclusions

In my view, once you cut through the hype, there isn’t a great deal to choose between Premium Bonds and the FBS Windfall Bonds. In the end it probably boils down to your personal circumstances and your attitude to risk.

If you have at least £10,000 to invest and like the security of a guaranteed 0.75% annual interest rate (variable) plus a small – but not minuscule – chance of winning a monthly prize of £1,000 to £50,000, Windfall Bonds are certainly worth considering.

With a holding of £10,000, with Premium Bonds you will win on average £100 in prizes in a year, compared with a guaranteed £75 interest (taxable) with Windfall Bonds. With Windfall Bonds though you will have a five times better chance of winning an additional prize from £1,000 to £50,000 per year than with Premium Bonds (though you won’t have the tiny chance of winning a life-changing sum).

As mentioned earlier, there are also other considerations, such as the ease of cashing in some or all of your Premium Bonds, compared with the slower cashing in process with Windfall Bonds and inability to make partial withdrawals.

So those are my thoughts, but what do you think? Are Windfall Bonds the way to go, or would you stick with Premium Bonds? Please leave any comments or questions below!

Please see also my 2017 post about Premium Bonds, where I reveal my own experiences with them and set out my thoughts on how they compare with other methods of saving/investment.

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November 10, 2018

Property Partner: My Review of This Property Crowdfunding Platform

Nick Investing property, crowdfunding 0 Comments

Today I am spotlighting Property Partner, a property crowdfunding platform I have been investing with since 2015.

As I have noted before on Pounds and Sense, I am something of an enthusiast for property investment (and specifically property crowdfunding). Among other things, I like the fact that you can make money from both rental income and capital growth. And investing in property can be a good way of spreading risk when you have equity-based investments.

Property Partner

Launched in January 2015, Property Partner has swiftly become the UK’s largest property crowdfunding website. They have over 11,500 investors, who between them have invested over £122.7 million in properties across the UK. Non-UK investors are welcome to join Property Partner too, so long as the legal system in their country permits it. Unfortunately US residents cannot invest via Property Partner at this time.

Property Partner offer shares in a wide range of properties. They include commercial buildings and residential ones, including PBSA (purpose built student accommodation). The properties tend to be on the larger side, so you won’t generally find single flats or terraced houses here. Neither do they sell shares in development or bridging loans, as offered by several other property crowdfunding platforms. This is what you might call ‘traditional’ property crowdfunding, where a property is bought on behalf of investors, who then receive a share of the rental income and any capital gains when the property (or their share in it) is sold. Here is a sample listing from their website…

One big attraction of Property Partner is that they have an active secondary market. That means investors can offer part or all of their portfolio for sale at any time. Obviously, to sell your shares in a property you will need a buyer, but Property Partner say that so long as they are priced reasonably (i.e. at or below the current official price) shares normally sell within 72 hours. By contrast, other property crowdfunding platforms such as The House Crowd and CrowdLords do not run formal secondary markets, though they say they will always help would-be sellers find a buyer if required.

Another attraction of Property Partner is that dividends are paid monthly, unlike other platforms which typically pay quarterly, biannually or annually. Money from dividends builds up in your account, and you can either withdraw it or reinvest it in other properties. When you add that you can get started on Property Partner for as little as £250, it is not all that surprising to me that they have enjoyed such success.

For legal reasons explained on the website, you can’t currently invest on Property Partner through a tax-efficient ISA or a SIPP. That means rental income will be liable for tax at your highest marginal rate, and any profits on selling will be subject to Capital Gains Tax (though there is quite a generous annual CGT allowance).

On the positive side, for anyone investing £5000 or more, you can opt for one of three managed plans: income focused, growth focused, or balanced. Your investments in them will be managed on your behalf to ensure good diversification of assets. Property Partner say that the net annual return (capital growth plus rental income) of the dividend plan should be at least 6.5%, the balanced plan at least 7.5% and the growth plan at least 8.5%.

My Experience

I have been investing with Property Partner for three years now, and have shares in a total of 17 properties. My largest single holding is around £2,550 (St David’s Lodge in Hastings, pictured above) and the smallest is £27.90.

I have aimed to build a diversified portfolio within Property Partner. I hold shares in both residential and commercial properties, in London and across the English regions (Property Partner doesn’t have properties in Scotland or Northern Ireland, and they have just one in Wales). To diversify further, I also recently bought a share in some purpose-built student accommodation in Leicester. Although as Leicester is my old university city, sentimental reasons may also have played a part in this decision!

During all the time I have been with Property Partner there have been no defaults or delays, and dividends have arrived in my account every month like clockwork. I understand that is true of all the properties on their books.

All properties on Property Partner are purchased for an initial five years. After the five years are up, all investors will get the opportunity to sell their share (or part of it) at a market valuation made by an independent chartered surveyor. As the platform hasn’t yet been going for 5 years, that hasn’t happened yet. Alternatively, as mentioned above, you can put your share up for sale at any time on the secondary market.

Pros and Cons

Based on my experiences, here is my list of pros and cons for Property Partner.

Pros

1. Fast, easy sign-up.

2. Well-designed, intuitive website.

3. Low minimum investment of just £250.

4. Property Partner take care of all the work involved in buying and managing properties. You just choose which ones to invest in.

5. Possibility to access your money at any time by selling on secondary market (though this does depend on another investor being willing to buy your shares at a price you find acceptable).

6. Guaranteed opportunity to sell at a fair market price after five years.

7. Customer service (in my experience anyway) is fast, friendly and helpful.

8. Charges are reasonable, with an initial 2% fee. There is no charge for selling shares.

9. Potential to profit through both capital appreciation and rental income.

10. Rental income is paid into your account every month. You can either withdraw it or reinvest it.

11. Up to £750 cashback is available for new investors of £2,000 or more via my referral link (see below).

12. Managed investment plans are available for investors of £5,000 or more.

Cons

1. No tax-free ISA or SIPP option available.

2. Rates of return are competitive but not the highest.

3. No development or bridging loans.

4. Some properties are purchased with gearing (loan finance). This makes them riskier if the value of the property should fall.

Conclusion

Overall, I have been impressed by my experiences with Property Partner. There have never been any delays or defaults, which can’t be said of every crowdfunding platform I have invested with. Property Partner state that the returns generated across all their properties since 2015 average 7.3% a year, taking into account both rental income and capital appreciation. That obviously beats bank and building society accounts by a considerable margin.

As ever, it is important to note that investments with Property Partner do not enjoy the same level of protection as bank and building society savings, which are covered (up to £85,000) by the Financial Services Compensation Scheme. All investments are secured against bricks and mortar, however, so even in a worst case scenario it is highly unlikely you would lose all your money.

The lack of liquidity with property investments generally means they should be regarded as medium- to long-term investments, and you should only invest money you are unlikely to need at short notice. The active secondary market on Property Partner does though mean that you should be able to recover your capital quickly if you need it, though there is no guarantee what price you will get.

Clearly, no-one should put all their spare cash into Property Partner (or any other investment platform). Nonetheless, it is certainly worth considering as part of a diversified portfolio. Not only are the rates of return significantly higher than those offered by banks and building societies, they are relatively unaffected by ups and downs in the stock market. Property investments aren’t a way of hedging your equity-based investments directly, but they do help spread the risk.

Welcome Offer

As an existing Property Partner investor, I can offer a special bonus for anyone joining via my link. If you click through this special invitation link, sign up and invest a minimum of £2,000 within 60 days, you will receive an extra bonus as follows (and so will I):

£2,000 – £30
£10,000 – £150
£20,000 – £300
£50,000 – £750

Not only that, once you are an investor with Property Partner, even if you only start with £250, you will be able to offer the same bonus to your friends and relatives and earn commission yourself. There is no limit to the number of people you can introduce through this scheme.

Obviously, this is a generous promotional offer by Property Partner and I assume it won’t be available forever. If you want to take advantage, therefore, don’t wait too long. I will remove this information if/when I hear the offer is no longer valid.

If you have any comments or questions about this review, as always, please do leave them below.

Disclosure: this post includes affiliate links. If you click through and make an investment at the website in question, I may receive a commission for introducing you. This has no effect on the terms or benefits you will receive. Please note also that I am not a professional financial adviser. You should do your own ‘due diligence’ before making any investment, and seek professional advice from a qualified financial adviser if in any doubt how best to proceed.

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November 2, 2018

Review: RESET by David Sawyer

Nick Making Money, Saving Money, Investing reviews 0 Comments

RESET is book aimed at mid-life professionals who feel as if they are in a rut and and want to get their lives back under control. I was kindly offered a review copy by the author, David Sawyer, so here are my thoughts about it…

The full title of the book is RESET: How to Restart Your Life and Get F.U. Money. By the latter, David means enough money so that you can say – er – “So long” to your employer if your job is causing you undue stress. The book does, though, emphasize that RESET doesn’t necessarily involve quitting your job, if you enjoy it and it is aligned with your personal goals and values.

RESET is available from Amazon in both hard copy and Kindle e-book versions. The printed version – which I received – amounts to quite a substantial 337 pages (plus a further 34 pages of preliminaries with Roman numbering!). The bulk of the book is arranged in six main sections, as follows:

1. What Matters to You?

2. Going Digital: How to Future-Proof Your Career

3. De-Clutter Your Life

4. Getting F.U. Money – a Plan

5. 11 Core Principles to Guide You in Work and in Life

6. 12 Do’s and Don’ts

Each section is divided into chapters. Part 4, Getting F.U. Money – a Plan, is the longest by some way and divided into 17 chapters. David is a PR professional, and as you might expect his book (which is published under the imprint of his PR company) is well written and presented.

RESET promotes, broadly speaking, the philosophy advocated by the FIRE movement. FIRE stands for Financial Independence, Retire Early. FIRE has been largely driven by some influential (mainly US-based) online bloggers.

The general idea of FIRE is that you seek to achieve financial independence at as early an age as possible, by simplifying your life, living more frugally, saving money and investing. The aim is to build up a substantial ‘pot’ of money that you can then use to buy yourself time and freedom. The ultimate aim – in many cases anyway – is to give up your job and retire early.

That doesn’t mean just joining the pipe and slippers brigade, though. It will typically involve spending more time enjoying life with loved ones, and working on projects that you enjoy and are important to you. These might involve anything from starting your own business to pursuing a hobby or interest, learning a new skill to doing voluntary work for a cause close to your heart.

As a money blogger myself I was familiar with quite a few of the concepts set out in the book, but David has done an impressive job of researching them and bringing them together in a highly accessible (and entertaining) way. As a semi-retired 62-year-old freelance writer I am not really in David’s main target readership, but I did still pick up some valuable tips and resources that I shall be using in my own life.

If you are a mid-career professional (roughly speaking between 35 and 60) and feeling stuck in a rut, this book will open your eyes to a range of strategies for regaining control of your life. You may not agree with every piece of advice David offers (I don’t share all his views about investment, for example) but you will almost certainly gain a lot of valuable, actionable tips and ideas. At the very least, it will open your eyes to a method that is increasingly being adopted by people on both sides of the Atlantic to take back control of their lives and achieve their long-term goals.

As always, if you have any questions or comments about RESET, please do post them below.

Disclosure: This post includes affiliate links. If you click through and make a purchase, I may receive a commission for introducing you. This will not affect the price you are charged or the terms you are offered.

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July 24, 2018

How to Invest Tax-free in Peer-to-Peer Lending with IFISAs

Nick Saving Money, Investing crowdfunding, sponsored post 4 Comments

Peer-to-peer (P2P) lending involves lending money to people and businesses via a P2P platform (generally web-based) and being paid back with interest by the borrower.

P2P lending has become increasingly popular among savers looking for better interest rates than those offered by banks and building societies. Until quite recently, however, you couldn’t invest in them tax-free.

All that changed in April 2016, though, with the launch of the Innovative Finance ISA, or IFISA for short. IFISAs allow anyone to invest tax-free in P2P lending via authorized platforms.

You can put any amount into an IFISA up to your annual ISA allowance. In the current 2018/19 tax year this is £20,000, which can be divided however you choose between a cash ISA, a stocks and shares ISA and an IFISA. So, for example, you could invest £10,000 in a cash ISA, £6,000 in a stocks and shares ISA and £4,000 in an IFISA.

Note that under current rules you are only allowed to invest new money in one of each type of ISA in a tax year. It is though generally possible to transfer money from one type of ISA to another without it affecting your annual entitlement (although there may be platform fees to pay).

After a slow start when only a very few were available, in 2018 the number and range of IFISAs has grown significantly. As of July 2018 over 40 UK IFISA providers are operating, ranging from well-established P2P lenders such as Zopa to new, upcoming platforms such as The Just ISA (see below). Interest rates paid vary considerably, from around 4% to 15%. Obviously, the higher rates reflect the higher levels of risk involved.

Although all IFISAs involve P2P lending, a number of different types are available. Those currently on offer include lending for all the following purposes:

property development
business loans
personal loans
green energy projects
bonds and debentures
entertainment industry loans
infrastructure projects

An unusual IFISA which certainly lives up to the “Innovative” description is The Just ISA. This is described as a litigation ISA. Lenders’ money is used to help individuals fund the cost of taking businesses, institutions and individuals to court, typically for reasons of professional negligence.

The Just ISA offers five-year bonds paying a gross interest rate of 8% per year (in practice this headline rate will be reduced somewhat due to fees and charges). All cases are underwritten and fully insured, and they say they have a success rate of 90%. There is a minimum investment of £2,000.

What Are The Risks?

All UK IFISA providers have to be authorized by the Financial Conduct Authority (FCA) and HMRC. This doesn’t in itself protect lenders (or savers if you prefer) against the failure of a platform, however. While savers with UK banks and building societies are covered by the government’s Financial Services Compensation Scheme (FSCS), which guarantees to reimburse up to £85,000 of losses, this does not apply to IFISA platforms.

All IFISA providers do offer various safeguards to lenders, though. These vary, but include provision funds to cover potential losses, insurance policies, and so forth. In many cases, also, loans are made against the security of property or other assets, which in the worst case could be sold to pay off any debts.

Even so, IFISA lenders don’t enjoy the same level of protection in the UK as bank savers. This is, of course, a major reason why the returns on offer are significantly higher. It’s therefore important to be aware of the risks and ensure you are comfortable with them before investing this way. It’s also important to lend across a range of platforms and loans, and not make the mistake of putting all your savings eggs in one P2P lending basket.

Summing Up

If you are looking for a home for some of your savings that can offer better interest rates than banks and building societies and won’t incur any tax charges, IFISAs are definitely worth considering.

As well as the higher interest rates, they can add diversity to your investments, helping you ride out financial peaks and troughs. Just be aware of the risks involved in P2P lending, and ensure you invest in IFISAs only as part of a balanced portfolio.

Disclosure: this is a sponsored post on behalf of The Just ISA. All investments carry a degree of risk. Be sure to do your own “due diligence” before investing, and speak to a qualified professional financial adviser if in any doubt before proceeding.

If you have any comments or questions about this post, as always, feel free to post them below.

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May 11, 2018

Guest Post: Property Versus Pensions – Which Is Best?

Nick Investing crowdfunding, sponsored post, pensions 4 Comments

Ever worry that your pension isn’t large enough to sustain the kind of retirement you’re looking forward to?

On average, British pensioners receive just 29% of their in-work earnings.

This small sum would leave many of us struggling to pay the bills, let alone being able to afford those long-awaited family holidays or treats. Latest figures from the Organisation for Economic Co-operation and Development show that 18.5% of those aged 76+ in Britain are living in poverty.

Those dependent on state funds are the worst affected and, with pensions failing to provide a sufficient income, many retirees rely on property as an alternative source of income.

Buy-to-let property is a big commitment, both in terms of the capital you need to get started and the long-term nature of the investment. Many of us look forward to relaxing during retirement, and there really is no guarantee of ‘a quiet life’ when you invest in rental properties. If you were planning to invest all your savings in property, it’s essential to consider how your finances would hold up should the property become vacant or need substantial repairs.

If house prices fall or stagnate, you could be left responsible for a property portfolio that contributes only a minimal amount towards your retirement income. Even if the housing market continues to boom, your personal circumstances may change and, as property is an illiquid asset, it can be tricky to turn your investments into cash at short notice.

So, if you’re in search of a way to supplement your pension and bring your retirement dreams a little closer to reality, you’ll be pleased to know that buy-to-let isn’t the only way to invest in bricks and mortar…

Kuflink’s innovative peer-to-peer platform offers investors many of the same advantages as buy-to-let, including monthly interest payments and property-backed opportunities, without the hassle of maintenance or deposit costs!

Register today to view Kuflink’s portfolio of exclusive short-term property loans offering up to 7.2% interest pa gross*, and invest from just £100.

*Capital is at risk. Rate correct as of April 2018. You should seek independent financial advice.

Thank you to my friends at Kuflink for an interesting post. I would just like to add that I am an investor with Kuflink myself and so far have been pleased and impressed with the service received.

As an existing Kuflink investor, I can also offer a special cashback incentive for anyone signing up and investing on the platform via my link. If you click through this special invitation link and invest a minimum of £1000, you will receive cashback as follows:

Investment amount	Cashback due
£1,000 – £5,000	2.50%
£5,000.01 – £25,000	3.00%
£25,000.01 – £50,000	3.50%
£50,000.01 – £99,999.99	3.75%
£100,000	4.00%*

*Cashback capped at £4,000

And yes, you really can earn up to £4,000 in cashback. If you invest £100,000 or more, then in addition to the £4,000 cashback, you would receive interest of around 6% to 7%. That means over a year your total returns on your £100,000 investment would be at least £10,000 (and more if you reinvest the monthly interest repayments on Select-Invest loans). Food for thought if you have that sort of money, though admittedly not many of us are lucky enough to do so!

Note that once you make your first investment of at least £100, you will have 14 days to maximise your cashback by making further investments. The 14-calendar day window starts from the moment you make your first investment. There is no limit to how much money you can invest in this window, and the cumulative total of your investments made within this 14-day period will be the total amount eligible for cashback.

The cashback amount will be transferred six months after your first live investment is made (assuming you haven’t sold up via the secondary market in that time). If Kuflink withdraw this offer after you have invested and before your cashback has been paid, you will still receive the cashback reward. The cashback will be paid into your Kuflink wallet, and from there you can either withdraw it to your bank account or invest it in another Kuflink loan or product.

As your referrer via this link or the link above, I will receive a referrer’s fee (variable) if you invest £1000 or more. Note also that once you have invested you will be able to offer the same cashback deal to your friends and colleagues, and get a referrer’s fee yourself as well. There is no limit to the number of people you can introduce through this scheme.

Obviously, this is a generous promotional offer by Kuflink and I assume it won’t be available forever. If you want to take advantage, therefore, don’t wait too long. I will remove this information if/when I hear the offer is no longer valid.

As always, if you have any comments or questions about this post, please do leave them below.

Disclosure: This is a sponsored post by Kuflink, for which I am receiving a fee. As stated above, I am also an investor with Kuflink myself.

Update:: I have now added an independent review of Kuflink based on my experiences of investing with them. Click here to read it.

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April 3, 2018

Hands-off Ways to Invest in Property

Nick Investing property, sponsored post 0 Comments

As I said in this recent blog post, I am a fan of property investment, as part of a balanced portfolio.

Property investors typically get a double benefit: rental income from tenants for as long as they own the property, and – in most cases – a profit when the time comes to sell.

A further attraction of property investment is that it can be beneficial tax-wise. Any profit you make when selling property is likely to be subject to capital gains tax (CGT) but there are generous annual allowances you can take advantage of (£11,700 in the tax year 2018/19).

In addition, if you invest via a platform (see below), income from rent is typically paid as dividends, allowing you to take advantage of the separate dividends tax allowance (£2,000 in 2018/19). Even if your dividend income exceeds the annual allowance, most people will only pay 7.5% tax on dividend earnings up to £34,500 (2018/19 figure).

Property investment can also be a great way of diversifying a mainly equities-based portfolio.

One drawback with property investment is that managing a property and its tenants can involve a lot of work. So today I want to focus on a property investment platform that takes care of all this on investors’ behalf (for a fee, of course). This makes it truly a hands-off way to invest in property.

The platform in question is FJP Investments. They partner with experienced developers to offer a range of property investments suitable for high net worth individuals and “sophisticated investors”. I’ve listed some of the main investment options they offer below.

Buy-to-let

This is, of course, the traditional way to invest in property. FJP offer investment opportunities in the UK buy-to-let market as well as overseas.

Student Property

This is becoming a very popular investment opportunity. The market is growing rapidly thanks to a government policy change ensuring an additional 200,000 students will be seeking accommodation in the UK by the year 2020.

Hotel Rooms

This type of investment started in the USA and has since taken off across Europe. Investing in a hotel room is simple. You buy the hotel room and then sub-lease it to the hotel operator. They in turn manage the day to day running, along with generating bookings. All you have to do is sit back and collect your share of the profits.

Car Parking

This is another popular income-generating investment. Investors purchase one or more spots in a car park and then receive a share of the income generated via the operator, who manages it on investors’ behalf.

Car parks are typically at or near airports. This market is expanding rapidly, with passenger numbers set to increase by over 220% in most major airports in the next 20 years. A further attraction in some cases can be free parking at the car park in question.

Care Homes

This involves investing in care homes for the elderly and/or people with disabilities. It is an ethical option but nonetheless one that offers good potential returns. Britain has an ageing population and yet the number of care beds is on the decline. There has been a lack of investment in the care sector which has created a growing demand for nursing homes, and an acute shortfall in the number of available beds is expected by early 2020. There is therefore a huge need right now for care home investment. Investors can profit from this while contributing to the creation of more high-quality care home facilities.

Risk v Reward

The potential returns from property investment are a lot better than you would get from a bank savings account at present, with 10% and upward widely advertised. Clearly, though, there is a greater element of risk with these investments. For example, you are not protected by the Financial Services Compensation Scheme, which will refund up to £85,000 if a bank with which you have an account goes bust. On the other hand, your money is in bricks and mortar, so it’s unlikely you would ever lose it all.

In the case of FJP Investments, as mentioned earlier, they work in association with highly experienced property developers. They set great store by protecting their clients’ money, not least because their reputation – and indeed their business – depends on this. They take the time to get to know their clients personally and help them choose investment opportunities from the range on offer that will meet their specific needs and goals. These are all, needless to say, hands-off investments.

It is, of course, vital to be aware of the risks associated with investing in property and only to do so as part of a balanced portfolio with assets in a range of classes, including readily available cash. Property can be somewhat illiquid and should therefore normally be regarded as a medium- to long-term investment.

Disclosure: This is a sponsored post for which I am receiving a fee. Please note also that I am not a financial adviser and nothing in this post should be construed as personal financial advice. Before making any investment it is important to do your own due diligence, and seek advice from a qualified financial adviser if you are in any doubt how best to proceed.

If you have any comments or questions about FJP Investments, or property investment in general, as always, please do post them below.

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November 10, 2017

Planning Your Finances in Retirement (Infographic)

Nick Making Money, Investing 10 Comments

Today I am pleased to share with you an infographic from Ireland-based insurance company Easy Life Cover (shared with their permission). This covers various aspects of finance in retirement, which is of course a core theme of this blog.

One of the most interesting facts shared in the infographic is that 7 out of 10 pre-retirees say they plan to carry on working in retirement. This represents a sea change from the old days when most people worked till retirement, took their pensions, and lived off that for the rest of their lives.

Nowadays retirement is increasingly done in stages, with many people choosing to work part-time in the run-up to retirement, perhaps switching to a different job or role within their organisation. The concept of semi-retirement would have been barely understood fifty years ago, but is increasingly becoming the norm now. I am 61 and regard myself as semi-retired, incidentally.

And even in retirement, many people choose to continue doing some work, part-time or short-term. As the graphic says, 80% do this because they want to rather than have to. Important reasons might include using (and passing on) skills they have built up over many years, keeping physically and mentally active, and providing a source of engagement outside the home. Many older people do voluntary work, while others do paid work to help supplement their pension.

Thank you to Easy Life Cover for an interesting infographic. You can read more about their mortgage protection insurance here (not a paid or affiliate link).

As mentioned above, the nature of retirement has changed dramatically in recent times. The old certainties are long gone. Retirement is undoubtedly more challenging than it used to be, but with people on average living longer, healthier lives, there are many more opportunities to enjoy this period of life as well. But this does mean it is more important than ever to plan carefully for retirement in order to enjoy it rather than merely survive it.

If you are retired or semi-retired, I do of course regularly list opportunities on this blog to generate extra income. They include home-based opportunities such as matched betting and part-time work in the gig economy, such as supervising property viewings for Viewber.

As always, if you have any comments or questions about this post and the points raised in the infographic, please do leave them below.

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October 10, 2017

How to Invest for Income from High-Yield Share Dividends

Nick Investing guest post 19 Comments

Today I have a guest post for you from my fellow money blogger Lewys Lew, who blogs at The Frugal Student.

Lewys has a particular interest in dividend investment. As I know this is a subject of interest to many readers of this blog, I asked him to write about it here.

Over to Lewys, then…

I watched the Conservative party conference in despair!

Not because I’m a Conservative but because once again the vultures circle Theresa May and Brexit seems to be going backwards.

Not that I voted to leave, but this constant uncertainty unsettles me and the market.

To add a cherry on top of bad news, productivity in the UK has begun shrinking and we’re no better off than we were in 2007.

What this means for you and me is that the economy continues to struggle and along with that interest rates remain dire.

Sure, for those of us who save a few pounds a month there are some decent bank accounts out there that offer 2%+ interest but these usually come straddled with a set of conditions and maximum deposits.

For those with large sums lying dormant in bank accounts the deals on offer are pitiful. With the current rate of inflation, your cash-pile may even be worth less.

In this post, I’m going to share with you how you could earn 5% in interest yearly.

Before we begin, there are a few things to note:

If you use this method your money is at risk.
To reduce risk, you should be prepared to lock your money up for 5+ years.
This method may not be suitable if you’ll need to use this money in an emergency
(remember to always keep six months’ worth of expenditure in an easy-access account)
Here’s some key terminology before we start:

Dividend = Money a company pays to you as a reward for being a share-holder.

Dividend Yield/Yield = A dividend as a percentage of a current share price, as so:

Dividend per share/Price per share.

Right, let’s get stuck in!

Dividend investing is a vast field. Myself, I’m a dividend growth investor. At 24 years old, I seek to buy stakes in companies who are growing their dividend at a rapid pace. Over time these types of stocks often increase their dividends at higher rates than companies who already pay a dividend at a higher yield.

But for those who maybe don’t have the benefit of a 30-year investment horizon, dividend yield investing may be a better choice for you. Frankly, getting just 1% of invested monies back as a dividend each year isn’t going to satisfy you if you’re close to retirement or retired.

The good news is that there’s an alternative dividend investing method that could see you getting 5% of your invested monies back each year, along with some capital gains along the way.

I’ll illustrate dividend yield investing with this example…

National Grid is a very boring, steadily performing utility company. It owns and manages the UK’s grid structure along with some bits in the United States and in return is allowed to make a modest profit from its operations. It’s a monopoly, meaning that we don’t need to worry about competition or anything of that sort.

As we can see from the graphic below (from the Hargeaves Lansdown website), National Grid pays a 5.15% dividend. This effectively means that for every £100 you invest, you’ll get £5.15 back every year.

The good news is that National Grid buys back its own shares, pushing up the capital value of your holding and reducing the possibility of capital loss over the long term (5+ years).

Dividend investing can be especially powerful if you use your dividends to buy more shares.

£1,000 worth of National Grid shares would let you buy around 5 additional shares with the dividend after one year. Compound this over the years and you could really start building a decent stream of dividend income.

Pros and Cons of High Yield Investing

Cons

When dividend yields go over 6%, this can be an indication that the stock is risky, as investors are fleeing the stock, thus reducing the share price and increasing the dividend yield (as this is relative to the price).
Stock prices could fall below your original purchase price and dividend income combined, leading to a net loss.
A large capital deposit is needed to make this method really effective; small amounts won’t really go a long way.
You have to pay to buy/sell stocks.
Identifying safe higher yield stocks can be difficult and time-consuming.

Pros

A 5+% dividend yield smashes any bank account out there.
The combination of steady stock price rises and dividend income can really boost your savings.
Large and ‘boring’ companies such as National Grid are very resilient and it’s relatively unlikely that you’d find yourself at a capital loss if you held such stocks over five years.
Remember that other investments can carry large risks and costs too. One such example is buying a rental property, where bad tenants, maintenance costs and the hassle can eat away at returns. By investing in a large company you won’t need to do anything else. Just sit back and soak up the dividends!

How Do I Buy Shares?

If you’re interested in building yourself a dividend income later on in life (40+) then I would certainly recommend chasing higher yields from boring large companies such as National Grid.

In order to buy shares you’ll have to sign up with a broker.

The most popular in the UK is Hargreaves Lansdown, but this platform charges a management fee of 0.45% annually, in the case of National Grid lowering your net income from 5.15% to 4.7%. They also charge £11.95 for share repurchases and 1% for dividend reinvestment.

To really reap the benefits of this strategy, I’d recommend signing up with online brokers De Giro, who only charge £1.75 a trade with no management fee.

If you like the idea of dividend yield investing but the risk is a little too high for you, I recommend you take a look at my Nutmeg Investment Review for a platform that manages your portfolio for you.

Many thanks to Lewys (pictured, right) for an eye-opening article.

Personally I have tended to stick with self-selected funds and ready-made portfolios (including Nutmeg) for my core investments, but I can certainly see the attraction of high-yield share dividend investing for part of my portfolio – especially as (being semi-retired) I am now looking to generate an income from my savings.

Another thing in favour of dividend yield investing is that there is a generous annual tax-free dividend allowance (which most people don’t make use of). Currently you can earn up to £5000 a year in dividends before any tax is due. The government has threatened to reduce this to £2000, but even if that happens the allowance is still well worth taking advantage of, as it comes in addition to other tax-free saving and investment opportunities such as ISAs.

If you have any comments or questions about this post, as always, please do leave them below.

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May 25, 2017

PrimeStox – An Unusual Way to Make Money Investing in Food

Nick Investing crowdfunding, food 4 Comments

If you’re looking for a more remunerative (and interesting) home for some of your savings than a low-paying bank account, you might like to check out what PrimeStox has to offer.

PrimeStox is basically a crowdfunding platform for high-quality food producers and sellers. These businesses are seeking short-term funding (typically for four months) to make products and get them to market. Once the products are sold, investors get their money back with interest. This is generally around 8% for four months, which works out as an annual rate of around 24%. If you immediately reinvest your money in another project, the annual interest rate will be more than this, due to the effects of compounding.

The opportunity may be best explained by an example, so here’s one product I invested in recently. Scarlett and Mustard is a range of premium salsas, dressings, and so on produced by a husband and wife team in East Soham. They say all the ingredients they use are 100% natural and sourced locally.

Last month they were looking for a total investment of £6,000 to fund 6,000 jars of their tomato salsa range (pictured below). I decided to invest a modest £50, which made me the beneficial owner of 50 jars. All being well, I shall receive £54 (my original investment plus 8% interest) by the end of September 2017.

You might ask what will happen if they don’t sell the salsa. The answer is that all investments are secured by the products concerned, so in the worst case scenario I will receive 50 jars of tomato salsa, which would keep me going for a very long time! Or I could sell them or give them away to friends, of course.

In practice, though, that is an unlikely scenario. So far all investments on PrimeStox have been repaid with interest on or before the date specified. If there is a problem, all investors vote on how best to resolve it, e.g. by selling the goods to a third party for a smaller margin. It is therefore highly unlikely that you would ever lose all your money.

Primestox Pros and Cons

Obviously, investing in PrimeStox is not as safe as putting your money in the bank. In addition, the money will be tied up during the investment period with no easy way of accessing it (although this.is generally no more than a few months). You shouldn’t therefore invest money you may need urgently in the near future.

On the other hand, there are a lot of things I like about it…

Rates of return are highly competitive, even compared with other crowdfunding and P2P investment opportunities.
The minimum investment is very low – typically £20. You can therefore test the water without risking any significant funds.
If you are prepared to spend a bit more – say £100 or over – in many cases you will receive a higher interest rate.
Unlike some other crowdfunding platforms where demand from investors greatly exceeds supply, with PrimeStox there are generally a few days to decide whether you want to invest and how much (though I have noticed that opportunities are filling up faster and faster).
You are supporting small businesses in the UK and abroad who are dedicated to producing high-quality foodstuffs.
And, as mentioned earlier, as an investor you hold title in the product until it is sold. PrimeStox will even send your share to you free of charge if you want.

As for why producers are offering these sort of returns, it is basically to aid their cashflow by covering the cost of raw materials, production, storage, transportation, and so on. But also, they hope that investors will act as ‘brand ambassadors’ for them, helping to promote the product, and maybe even buying some themselves.

In that spirit, here are links to the three products I have invested in on the platform so far, with the amounts I purchased included.

Scarlett & Mustard – Tomato Salsa – £50

Strong Roots Sweet Potato – £100

Bread Tree – Rainbow Pasta (pictured below) – £56

There is absolutely no obligation to promote any of the products you invest in, but obviously as an investor you have a financial interest in ensuring they are successful. Investors are also sometimes offered rewards, discounts and other incentives by the producers in question.

Clearly nobody should invest more than a small portion of their savings in PrimeStox, but the potential returns on offer are compelling, and investing this way is certainly more fun than stocks and shares!

If you have any comments or questions about PrimeStox, as always, please feel free to post them below.

Disclaimer: I am an investor with PrimeStox but have no other relationship with the company and am not an affiliate for them. Neither am I advising anyone to invest in PrimeStox. Investment decisions are personal to every individual and if in any doubt you should seek advice from a qualified financial adviser. This post is provided for information purposes only and should not be construed as financial advice..

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