A turbulent period for global investment markets means that history teacher Chris Hume thinks his Zopa loans could provide better returns than his portfolio of stocks and shares this year.
“So far I’m up about 2% this year on my investments, while with Zopa I’m getting between 4.5% and 5%,” says Chris, 35. “I’ll be happy if I make 6% from the markets by next April, but with what’s going on in Greece at the moment and the rest of the world, there’s a good chance that won’t happen. I wouldn’t be surprised if Zopa does better, to be honest.”
Chris, who lives in Edinburgh, made his first Zopa loan a year ago after a friend introduced him to peer-to-peer lending. “I started by putting a £100 lump sum in, and now I drip feed £50 a month in as well,” he says.
The main attraction was the higher rates, Chris adds. “I was getting 2% from my bank in an ISA, but this is tied up for 18 months. Although that’s not taxed, I think it’s good that the government is going to introduce the £1,000 tax-free limit next year for returns from savings and P2P loans.”
Chris was happy to take the risk associated with P2P lending. “I was planning to invest over five years – I suppose I might get some borrowers defaulting, but over a long period, and with the Safeguard fund in place, I’m sure my returns will be better than the banks. In any case, I’ve had no bad debts so far.”
Long-term financial planning
Chris says he gets his financial nous from his father. “He put money into shares and I ended up doing the same. Initially I was buying and selling shares, and I managed to make a bit of money. But that meant I had to pay a lot of attention to what the prices were doing, so I now just invest through six or seven funds.”
Chris’s Zopa loans are part of a wide spread of savings and investments – he also has Premium Bonds – that are part of his long-term financial plans.
“I’m not confident that my pension as a teacher is going to be so generous when I reach retirement,” he says. “And I don’t really want to be teaching history until I’m 68. I’d like to retire at 60, like my dad.”