Risky savings website hits buffers

A PEER-TO-PEER investing website that holds the cash of 900 savers has gone into administration after running out of money.

Savers were lured into Funding Knight with promises of returns of up to 8pc for lending their cash to small businesses.

But there were fears savers might lose all their savings after Funding Knight collapsed in June.

Last week, the peer-to-peer firm was rescued by investment firm GLI Finance, whose bosses said customers’ money was safe and that they could withdraw it whenever they liked. However, the collapse will raise fears that peer-to- peer investing may not be as safe as it seems.

Savers sick of rock bottom High Street interest rates are pouring £9 million a day into this type of investment, which claims to beat the rates offered by banks.

In April, the Government said savers could have their returns tax-free in a new form of peer-to-peer Isa.

But to offer these deals, the websites must obtain a stamp of approval by City watchdog the Financial Conduct Authority. It has been probing firms’ books in such depth that after three months, just eight out of 94 peer-to-peer firms have been given permission to offer Isas.

In May, Money Mail revealed how some major peer-to-peer firms were offering huge, unsecured, interest-only loans to individual borrowers.

If these loans turn sour, it could put savers’ money at risk.

A spokesman for the trade body, the Peer-to-Peer Association, says: ‘It’s better for this process to take longer and for it to be done robustly.’