The Financial Conduct Authority (FCA) has today introduced a cap on how much first-time investors can invest in peer to peer (P2P) loans, to protect them from poor practice and prevent them being over-exposed to risk inside Lifetime ISAs (LISA).
A lifetime ISA is an investment account that people can save in with a 25% government bonus added each year that can be used towards a deposit on a first property or keep into their 50’s and beyond and use as a tax free retirement plan.
Lifetime ISA investors can only deposit up to 10% of their assets in peer to peer lending unless they have received regulated financial advice.
Before allowing consumers to invest, the new rules say an assessment of the investors knowledge of P2P platforms must be made and ensure they understand their money is not covered by the Financial Services Compensation Scheme (FSCS) before allowing them to invest.
New marketing rules state investment platforms must adhere to strict marketing rules and ban mass advertising campaigns and advertising can only be aimed at high-net-worth or sophisticated investors.
10% exposure is a sensible place to start for inexperienced investors and once they have more experience they can invest more.