P2P Pensions: Evolution SIPP

The providers of P2P lending in the Evolution SIPP, Greyfriars, announced in late 2016 that from 1 January 2017 it will open no new P2P lending accounts and no new P2P lending can take place through its SIPP.

Greyfriars stated that the reason for this change is that it takes too long for it to administer P2P lending. Read more here.

SIPPclub owns the Evolution SIPP brand. Assuming it is able to find a different pensions operator that will take over P2P lending on the same terms, here is how it works:

The Evolution SIPP, a pension that allows you to do P2P lending wrapped inside it to reduce your taxes. (See sidebox if you don't know what a SIPP is.)

The Evolution SIPP has by far the largest selection of P2P lending opportunities of all available SIPPs.

Unfortunately, most people reading this article can't use this particular SIPP.

Firstly, because its costs only become worth it if you have a big pot. The average pot is around £250,000.

Secondly, you need to be a member of SIPPclub to open the Evolution SIPP. While membership is free, you need to pass at least some criteria:

• One way to be allowed in the club is if you earn more than £100,000 per year. You can also get in if you are worth £250,000 (excluding the paid-up value of your home).
• Alternatively, you must be allowed to legally categorise yourself as a “sophisticated investor”, so being a business angel or a venture capitalist, perhaps.

As I wrote in P2P Lending Through a Pension, you might be able to get around the sophisticated investor rules on a technicality, but you'll still need a large pot of money for the Evolution SIPP.

The costs

The Evolution SIPP costs £1,500 per year including VAT. That's more than many people can save in a year!

The silver lining is that this is its only charge specifically from the SIPP provider. You don't have the usual long schedule of set-up, admin, dormancy, commission, exit and other costs.

However, £1,500 is a lot of money, so you need a big pot for investment and lending to make the cost worthwhile.

In addition, you have to have something very specific that you want to invest in – such as P2P lending –  that you can't get in more mainstream pensions or in more widely available SIPPs.

Because otherwise you can get a much better price elsewhere, as Monevator wrote in September 2014.

When to P2P lend through Evolution SIPP

If you pass the above criteria, how much do you need to lend for it to be worth using the Evolution SIPP with its £1,500 fee?

• 40% taxpayers could consider the Evolution SIPP if you're going to lend a minimum of £100,000.
• 45% taxpayers could consider it at around £90,000.
• 20% taxpayers could probably consider it if you're lending around £175,000. The minimum is much higher because the tax advantages of pensions for you is smaller.

I base these figures  on the assumption you'll earn 5% per year. If you're confident enough to assume a higher average, even after weathering through bad times, then you could lower your limits.

But the bigger the pot, the more advantageous it becomes to P2P lend through the Evolution SIPP. If your lending pot is tens of thousands over my suggested minimums, you're entering territory where it's a much easier decision to use the SIPP.

Exotic investments may tip the balance

When checking if you've got the £90,000, £100,000 or £175,000 minimum to make the costs worthwhile, you don't just have to consider the P2P lending you want to do.

If part of the money is for exotic investments that are only available in a smaller number of more exclusive SIPPs such as this one, that can count too.

Lending charges are on top

If you lend through the Evolution SIPP, the P2P lending company will still charge you as normal. This is not a pension charge but the lending charges you would face anyway even if you weren't lending through the pension plan.

Your P2P lending options through Evolution SIPP

With Evolution SIPP, you can lend through:

Ablrate, business loans (especially against aircraft).

Abundance, business (renewable energy projects).

Archover*, business.

Assetz Capital, business and property.

CapitalStackers, property.

CrowdProperty, property.

Crowdstacker, business.

FundingKnight, business and property.

HNW Lending, short-term property and high-value pawnbroking.

Money&Co, business.

Proplend*, property.

RateSetter, mostly personal loans but some business and property.

rebuildingsociety*, business and property.

Relendex, property.

Saving Stream, property.

ThinCats, business and property.

UK Bond Network, business.

Read more in the P2P Pensions Guide.

*Commission, fees and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from ArchOver, Assetz Capital, RateSetter and Rebuildingsociety, and other P2P lending companies not mentioned above either when you click through from our website and open accounts with them, or to cover the costs of conducting our calculated stress tests and ratings assessments. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.