07-02-14, 12:02 AM
The idea of peer to peer lending is tempting: Funding Circle lends to small businesses, Zopa lends to individuals, Ratesetter and Wellesley are other companies offering fixed term deals. There is more risk, of course, some have a provision fund which should cover defaulting borrowers, but they aren't covered by the FSCS.
Alternatively, a stocks and shares ISA can be good and has the advantage that any gains are tax exempt. You can go with a package that tracks a particular index like the FTSE or, if you're feeling brave, self select with a broker like TD Waterhouse. If you opt for self-select, buy shares in 5 to 8 companies to spread the risk (more than that and the dealing charges start to become significant).