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Will 2015 be the year of P2P?

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Peer-to-peer (P2P) lending sector made headlines this year for its stunningly fast growth. But with three big developments coming up in the year ahead, will 2015 be the year of P2P?

According to Andrew Hagger, personal finance analyst and commentator for, the sources of increased P2P demand are on the horizon.

He says: “The growth of P2P and alternative finance over the last couple of years has been impressive; however there is a potential triple whammy on the horizon which could deliver an increase in investment on a much larger scale and prove to be a real ‘game changer’ for the sector in 2015.”

Hagger points to the following three factors:

Pension freedom

First announced in the 2014 budget, Chancellor George Osborne’s sweeping change to the pensions industry will free retirees from the requirement to spend their pension pot on an annuity.

According to Hagger it is “inevitable” that more choice and giving retirees the ability  to manage their own savings will see some turn to alternative investment options.
He said: “With traditional cash savings rates at rock bottom and the volatility of stock market investments less attractive for those in later life, it’s likely that P2P will see a sizeable knock-on effect including a sharp increase in new business.”

The Small Business Enterprise and Employment Bill

This bill, passed by the government to end the strangehold of high street banks on small and medium-sized enterprise funding, includes new mesutres to support smaller businesses seeking finance by helping them seek out alternative lenders – including P2P – if big banks turn them down.

While it isn’t yet law, the bill is expected to be passed before the 2015 general election, according to Hagger, but even without it ties between mainstream banks and P2P lenders are growing stronger.

He explained: “In June, for example, Funding Circle announced a tie-up with Santander where the bank will proactively refer small customers looking for a loan to Funding Circle. In return, Funding Circle has pledged to signpost borrowers to Santander for relationship banking support and international banking expertise.”

The ISA inclusion

As of next year ISAs will be elibigle for inclusion in NISAs, making the interest earned on the loans tax free.

With around £26m in cash ISA accounts, Hagger says, even a fraction of these funds finding their way into P2P lending could make it a big business.

He says: “As this money will be moving from the security of cash ISAs, the lower risk P2P platforms will likely be the biggest winners.”

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