Yahoo Finance Peer-to-peer giant Zopa launches first protected savings accounts
Peer-to-peer giant Zopa has launched its first range of savings accounts that are protected by the financial industry lifeboat scheme.
Zopa, considered one of peer-to-peer’s “big three” alongside Funding Circle and RateSetter, has launched five fixed-term accounts for customers looking to save their cash for between one and five years. Accounts must be opened with at least a £1,000 deposit.
The one-year fix is available with an interest rate of 1.05pc while the two-year deal has a rate of 1.15pc. Both three- and four-year savers will return to 1.26pc to savers yearly and the five-year fix has a rate of 1.3pc.
These rates are competitive but many can be beaten by rival firms. The top one-year fixed saver is currently available from Charter Savings Bank and offers an interest rate of 1.22pc to savers. However, this requires a minimum balance of £5,000.
Charter Savings Bank also has the top two-year deal, with an interest rate of 1.31pc, while Paragon Bank has the market-leading three-year fix at 1.35pc. Zopa has the top paying four-year account but is beaten by Paragon Bank in the five year market, as it offers a rate of 1.4pc.
Unlike cash invested on Zopa’s peer-to-peer platform, deposits held in these accounts are fully protected up to £85,000 by the Financial Services Compensation Scheme, the industry lifeboat fund, if Zopa were to cease trading.
Zopa was awarded a limited banking licence in December 2018 and was approved for a full licence in June 2020. It offered savings accounts to existing customers on a trial basis but will now offer them to all.
The firm said that customers were looking for the certainty of fixed returns given the economic turmoil caused by coronavirus.
Jaidev Janardana, of Zopa, said: “People quite rightly want to know that their savings will deliver a return that helps them make the most of their money.
“Launching our fixed-term savings accounts delivers the much needed choice and reassurance that consumers are looking for.”
This move marks another step away from Zopa's traditional peer-to-peer model. Earlier this month Telegraph Money reported that multiple peer-to-peer firms, including Zopa, were shifting their businesses away from the sector.
There have been repeated warnings about the long-term viability of the sector, particularly now default rates are expected to rise due to the pandemic.
