Question
I have over £1 million in cash in my SIPP which is with Suffolk Life. I am receiving very little if any interest on this cash which is mostly in GBP but some is in Euros and some in US$.
I want to earn more interest on this cash. Suffolk Life do offer to place these fundd on deposit with 3rd party banks and building societies but receive fees for themselves for this service and the rates are very low and the charges high.
I thus think I need to find either a financial adviser that will pay good rates on cash (v difficult I think) or change my SIPP provider to one that does pay good rates on my cash.
You were quoted in the FT on 19th February saying "next big step forward could be more choice on cash". Can you tell me of any SIPP providers or advisers that will do this?
I can only find Fair Investment Company but that charges a fee of 0.85% which is £8,500 p.a. for my SIPP.
Have you got any other ideas how I can get a better rate of interest on my SIPP cash?Answer
At the cheaper end of the SIPP market decent cash rates are non-existent. Providers such as Hargeaves Lansdown and sippdeal offer just one cash account - their own - paying next to no interest (up to 0.25% and 0.1% respectively).
It's a very nice earner for the SIPP providers but a terrible deal for customers. They get away with it due to lack of competition and I suppose the majority of customers hold little cash so they don't kick up a fuss. My comment in the FT was aimed at these providers offering more completive cash accounts from a range of banks and building societies at some point. I'm pretty sure it'll happen, but think it's probably 2-3 years away.
Fair Investment has taken a step in the right direction by offering a Scottish Widows Bank Account paying up to 2% a year via its SIPP but, as you point out, the 0.85% annual SIPP fee rather negates this.
So to get a reasonably attractive cash rate you still currently need to open a 'full service' SIPP, which comes at a price. And, even then, you might still be restricted to a range of savings accounts paying paltry rates of interest - Suffolk Life being a prime example.
If you want access to any savings accounts permitted in a SIPP then the AJ Bell Sippcentre SIPP might fit the bill. Annual charges seem to be around £300 so it could prove cost effective given the size of your pension fund.
You can then shop around for the best savings account deals, although you're still restricted to savings accounts that banks and building societies allow to be held within a pension - with generally lower rates than you can get via conventional savings accounts (probably because the banks don't much fancy their chances of cross-selling you other products). Nevertheless, there are still some reasonable rates on offer, best buys at the time of writing include:
The Anglo Irish Bank (Isle of Man) Access account paying 2.6% on sterling, 2.25% on euros and 1.5 on US dollars.
Investec Pension and Trust Reserve Account (min £25,000) 2.25%, 1 month notice.
Scottish Widows Bank 5 Year Fixed Term Pension Fund Deposit Account (min £10,000) 4.5%.
You might find the Investment Sense website helpful as they display a list of savings accounts available for SIPPs.
But, a word of warning. Pay close attention to the amount of investor compensation offered by the scheme covering your chosen account(s) (e.g. for those covered under the FSCS it's £85,000 per institution), else your strategy of using cash for safety could backfire in the unlikely event your chosen bank(s) goes bust.
As an alternative you could consider short dated gilts (and/or equivalent euro/US bonds), which are arguably safer than savings accounts (the UK Government is unlikely to default), although current yields to redemption aren't very exciting - about 1% for 1 year and 2% for 3 year.
Hope this helps.
I have over £1 million in cash in my SIPP which is with Suffolk Life. I am receiving very little if any interest on this cash which is mostly in GBP but some is in Euros and some in US$.
I want to earn more interest on this cash. Suffolk Life do offer to place these fundd on deposit with 3rd party banks and building societies but receive fees for themselves for this service and the rates are very low and the charges high.
I thus think I need to find either a financial adviser that will pay good rates on cash (v difficult I think) or change my SIPP provider to one that does pay good rates on my cash.
You were quoted in the FT on 19th February saying "next big step forward could be more choice on cash". Can you tell me of any SIPP providers or advisers that will do this?
I can only find Fair Investment Company but that charges a fee of 0.85% which is £8,500 p.a. for my SIPP.
Have you got any other ideas how I can get a better rate of interest on my SIPP cash?Answer
At the cheaper end of the SIPP market decent cash rates are non-existent. Providers such as Hargeaves Lansdown and sippdeal offer just one cash account - their own - paying next to no interest (up to 0.25% and 0.1% respectively).
It's a very nice earner for the SIPP providers but a terrible deal for customers. They get away with it due to lack of competition and I suppose the majority of customers hold little cash so they don't kick up a fuss. My comment in the FT was aimed at these providers offering more completive cash accounts from a range of banks and building societies at some point. I'm pretty sure it'll happen, but think it's probably 2-3 years away.
Fair Investment has taken a step in the right direction by offering a Scottish Widows Bank Account paying up to 2% a year via its SIPP but, as you point out, the 0.85% annual SIPP fee rather negates this.
So to get a reasonably attractive cash rate you still currently need to open a 'full service' SIPP, which comes at a price. And, even then, you might still be restricted to a range of savings accounts paying paltry rates of interest - Suffolk Life being a prime example.
If you want access to any savings accounts permitted in a SIPP then the AJ Bell Sippcentre SIPP might fit the bill. Annual charges seem to be around £300 so it could prove cost effective given the size of your pension fund.
You can then shop around for the best savings account deals, although you're still restricted to savings accounts that banks and building societies allow to be held within a pension - with generally lower rates than you can get via conventional savings accounts (probably because the banks don't much fancy their chances of cross-selling you other products). Nevertheless, there are still some reasonable rates on offer, best buys at the time of writing include:
The Anglo Irish Bank (Isle of Man) Access account paying 2.6% on sterling, 2.25% on euros and 1.5 on US dollars.
Investec Pension and Trust Reserve Account (min £25,000) 2.25%, 1 month notice.
Scottish Widows Bank 5 Year Fixed Term Pension Fund Deposit Account (min £10,000) 4.5%.
You might find the Investment Sense website helpful as they display a list of savings accounts available for SIPPs.
But, a word of warning. Pay close attention to the amount of investor compensation offered by the scheme covering your chosen account(s) (e.g. for those covered under the FSCS it's £85,000 per institution), else your strategy of using cash for safety could backfire in the unlikely event your chosen bank(s) goes bust.
As an alternative you could consider short dated gilts (and/or equivalent euro/US bonds), which are arguably safer than savings accounts (the UK Government is unlikely to default), although current yields to redemption aren't very exciting - about 1% for 1 year and 2% for 3 year.
Hope this helps.
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