Could peer-to-peer lending help your retirement funds?

Over the past decade, peer-to-peer lending has proven itself to be a safe, successful and viable option for people looking for a healthy return on investment.

But could it provide an alternative source as potential pension income for your retirement?

According to AltFi Data, more than £10 billion has been invested through UK peer-to-peer lenders – returning an average of 7.17 per cent total gross interest.

Large numbers of people are looking for alternative ways of investing their pension pot before and during retirement. Many have been taking advantage of the cheaper rates and higher returns offered by this type of service.

What is peer-to-peer lending?

Peer-to-peer lending (sometimes known as P2P lending) is the lending of money to individuals or businesses through online services which match lenders to suitable borrowers.

The services run much more cheaply than traditional lending as there are none of the usual overheads, being operated solely online. Because of this, lenders can earn higher returns compared to savings and investment schemes from the high street financial institutions.

However, like with any form of lending, there is a risk of the borrower defaulting on the loans taken out from peer-lending websites.

Last year, interest rates on one-year Pensioner Bonds saw retired investor to seek other ways of securing better rates. Some loans see risk reduced with the backing of tangible assets such as property and jewellery.

There is a large selection of places to begin your P2P lending. Peer-to-Peer SIPPs (self-invested personal pensions) allow people to share in the funding of a loans portfolio to businesses, which have proven their credit worthiness.

While there are many other options to boost pension funds, peer-to-peer lending has grown in popularity in the past ten years. This rise in profile may be a reaction to the financial crash in 2008, which saw a huge drop in confidence and trust in traditional banking institutions. But it could also be that this new, alternative movement has seen borrowing and lending take on a more diverse and transparent approach in keeping with the changes of the new millennium.