Understanding the risks

Our municipal investments are not a savings account. That means there are risks when you invest, but there is a very low risk of the council failing to repay you. This is because councils are part of the UK government, and have strict laws that govern their finances.

Key risks of municipal investments

This is not a savings account

You are making an investment and lending money to a council, which is not the same as putting money in a savings account with a bank.

Fixed term and interest rate

The investments are long term - usually five years - with the interest rate fixed for the whole term. You won’t be able to withdraw your money early if you need it (although you can try and sell your investment). Check you are happy with this before you invest, remembering that interest rates on other financial products may go up and down during the investment term.

You might not get all your money back if you sell early

We operate a marketplace if you want to sell before the term ends. But there is no guarantee you will find a buyer at the price you wish to sell, particularly if interest rates on other financial products have changed during the investment term. Learn more.

No FSCS protection for investments

In relation to claims against failed regulated firms, the Financial Services Compensation Scheme (FSCS) does not cover investments in P2P loans like our council investments. Learn more in our help centre.

Investment risk FAQs

No, if you choose to invest through an ISA, it does not change the risk of the investment. It only means that any interest from your investment will be tax free.
If Abundance were to go out of business, the administration of your investment could be disrupted and you may be prevented from selling your investment. We have plans in place to ensure the payments on your investments continue to be administered. Read more
No, a savings account is a deposit product, typically with a bank. A municipal investment is an investment where you lend money to a council.
No, councils cannot go bankrupt. Bankruptcy is a concept that applies to companies. You can learn more about councils' financial controls, including what happens if they get into financial trouble here.
You can try to sell through our marketplace, but selling is not guaranteed. You may have to accept less than you originally invested, particularly if market interest rates have changed.

What’s the risk of losing your money?

When you invest, it is important to consider whether scheduled payments will be made, and if your original investment will be repaid.

As a potential investor in a council, media headlines around council finances - such as significant budget shortfalls and concerns about ‘bankruptcy’ - might be alarming to read. But these headlines do not reflect the reality when it comes to the risk of a council not paying you back.

To understand the reason for this, it is important to appreciate the differences between how companies and councils operate. On the surface, they both manage their finances in a similar way. But things can and do go wrong, and this is where the differences become apparent. Companies can file for bankruptcy, leaving creditors behind them. Councils, however, can’t be declared bankrupt. They have the right to raise taxes, and ultimately have the UK Government standing behind them, because of their essential role in keeping our society running.

There is no record of a UK council ever defaulting on a debt, and there have been no defaults on our municipal investments.

Key points to understand

Councils have to repay their loans

Councils cannot be declared bankrupt and leave creditors unpaid, like companies can. Even if they get into financial trouble, they have to repay loans while they work to resolve their finances.

Councils operate under strict financial controls

Because of their critical role in our society, councils are legally required to operate balanced budgets. This includes budgeting for repayments on any money they borrow, which means they can only take out new borrowing they can afford to repay.

Councils have clear processes to follow if they get into financial trouble

If a council gets into financial trouble there is a specified process they must follow, which in England is called issuing a Section 114 notice. This allows them to take additional steps to balance their budgets. But, crucially for investors, this process can’t be used to avoid paying loans, or interest owed - even in the most severe cases, when central government becomes involved.