Saving in Changed Times

Cotta

Hi All,

With interest rates for regular savers dropping dramatically what are people opting for as alternatives?

For example are outlets like Funding Circle and even Premium Bonds now serious options?

MaxiRobriguez

Peer to peer lending like funding circle has been good for people for many years but the economy is slowing and default risk therefore probably increasing. An investment in P2P is in a completely different universe when considering risk than regular savers.

Premium bonds are closer, and a decent way not to lose money, but you're unlikely to get decent returns. You're reliant on luck.

Your other main options are equities, bonds or commodities/precious metals - all of which come with capital at risk.

Ultimately though inflation is low, so saving rates are going to be low as well. You need to decide what your objectives are. If you need to grow your wealth, and are willing to take risk, then it's equities/bonds. If you need to protect your wealth, then it's savings accounts.

Flobberchops

As the poster above says - if you're willing to take on a degree of illiquidity and risk, choose stocks and shares over P2P. The average rate of return and timescales involved are actually fairly comparable, but there's much more risk of a borrower declaring bankruptcy than a FTSE100 company going under without warning.

arwain

Cotta wrote: »

For example are outlets like Funding Circle and even Premium Bonds now serious options?

I won £1100 this month on the Premium bonds, this is the most in one month ever. Earlier this year though I went four months in a row and didn't win a thing, I have the max holding. I think I have read somewhere that with the max holding and average luck one should get about 1.4% return.

I don't know much about P to P, but from everything I have read, the really good rates of return have long gone, I would not be surprised if another one or more of these companies are going to get into a lot of difficulty in the not too distant future.

Regarding stocks and shares then you need to think about a long term investment, many people think we are heading for a global sell off in stock prices (no one can know for sure though).

Zero_Sum

If you do want to dabble with P2P, best stick to zopa or ratesetter. Also others have mentioned there is the liquidity issue, so no good if you need istant access to the money . Theyre basically like a loan in reverse, you get back a fixed amount each month consisting of capital & interest. Over time the capital gets larger & interest gets smaller. Of course this is subject to loan not defaulting. Ratesetter does have a provision which it pays out defaults from, but if things get really bad & provision runs out you get a financial haircut.

Albermarle

If you do want to dabble with P2P, best stick to zopa or ratesetter

Or Lending Works , which is similar . Zopa seems to have gone downhill from the early days .
In any case P2P should be seen as an alternative investment and therefore only for dabbling in , I agree.

AnotherJoe

arwain wrote: »

I won £1100 this month on the Premium bonds, this is the most in one month ever. Earlier this year though I went four months in a row and didn't win a thing, I have the max holding. I think I have read somewhere that with the max holding and average luck one should get about 1.4% return.

Slightly off. The overall return is 1.4 but that includes the handful of million pound and similar high wins. The exact number is in an article in here somewhere but if you discount those given how incredibly unlikely they are, it's more like 1.2%.
On the upside there's no tax.

arwain wrote: »

I don't know much about P to P, but from everything I have read, the really good rates of return have long gone, I would not be surprised if another one or more of these companies are going to get into a lot of difficulty

Yep. If you read the P2P threads in here a common theme is that it's taking many months to get money out. I think that ship sailed a long time ago.

Zero_Sum

Albermarle wrote: »

Or Lending Works , which is similar . Zopa seems to have gone downhill from the early days .
In any case P2P should be seen as an alternative investment and therefore only for dabbling in , I agree.

Ive tried Lending works & cash was waiting to be lent out for about 2 weeks. So i withdrew & never bothered with it.

Albermarle

Ive tried Lending works & cash was waiting to be lent out for about 2 weeks. So i withdrew & never bothered with it.

This waiting seems to bother a lot of people ( on the P2P Independent forum ) but I reality if you are investing for a 5 year term , then two or three weeks at the beginning that it earns nothing , has almost zero effect on total returns.

Zero_Sum

Albermarle wrote: »

This waiting seems to bother a lot of people ( on the P2P Independent forum ) but I reality if you are investing for a 5 year term , then two or three weeks at the beginning that it earns nothing , has almost zero effect on total returns.

Yeah but when the repayments are paid, then reinvested & its taking a few weeks, it eats into your returns

Albermarle

Yeah but when the repayments are paid, then reinvested & its taking a few weeks, it eats into your returns

The repayments go to the front of the queue, it is the new money that has to wait.