Holding cash in pension fund

wjr4

gmcarthu wrote: »

Thanks for the replies so far guys.

I have of course asked my advisor to respond and in fact I have my annual review next week and we will discuss it then. I have a low-medium risk profile and would expect to hold some cash at times, I just cannot get my head round why the return is zero - not close to zero, but specifically zero, so that seems to me a conscious decision and not subject to market rates !!

Is it in a cash account or an actual cash deposit? - I don't know the answer, on my pot summary it just says 'Capital account balance'.
What is the differentiation between the two types ?

Some cash accounts within a SIPP/platform do not pay interest at all.

gmcarthu

But why would that be the case - I simply cannot get my head round this zero return on cash, guess I need to wait for my advisor to come back to me after they have spoken with the fund manager for an explanation.


Thanks to all so far.

dunstonh

I just cannot get my head round why the return is zero - not close to zero, but specifically zero,so that seems to me a conscious decision and not subject to market rates !!

if it's in the platform account it will be as there is so little scope for returns when the base rate is 0.5%. As mentioned, the platform does not have the ability to lend your money like a bank can. It can only use other cash-like instruments with no tie-in. So, you are talking little or no margin when base rate is so low.

Some platforms pay base rate. Some platforms pay nothing. You generally find the ones that pay nothing have lower charges than the ones that pay something.

They are not meant for long term holdings. They are short term (as in less than 3-5 years) money. Typically a float to pay charges, receive rebates, tax, cover withdrawals, have dividends paid to etc. I tend to refloat the cash account at each annual review to the required level. They are also used by people wanting to exit an asset/fund but not yet decided on what to replace it with yet. Again, a short term home.

You should never think of these as a viable replacement for investments or being suitable for savings.

gmcarthu

Thanks for the very clear reply dunstonh.

I don't think of cash as an investment vehicle, especially at zero and that's probably why I'm bringing it up and will need to amend my risk profile - I just think having £80K in cash is far too high for my circumstances, where I am not yet taking any pension and probably won't need to for another 3 years or so.


Thanks again

soulsaver

You do what allows you to sleep at night...

HL charges are too high for when you (re)invest amounts of cash that would attract meaningful interest IMHO.

IWebb I believe pays 0.5%; not a lot you say?

No, but if you end up with £100k on the sidelines for a year it would be £500 you wouldn't get with Hl, nor anywhere else SIPP wise AFAIK... & pays for a modest week in the sun...

And if you decide to go 'all in' their charges are someway less than H-L's

OldMusicGuy

Cash does not sit at zero in an HL Vantage SIPP. It can attract interest rates as high as 0.2%! They pay interest on cash balances starting at .05% and then it goes up to a max of .2%. The important thing to remember is there is no platform charge for holding cash.

HL is not a bank. Their goal is to get you to use their platform to invest in things. And if you want your money to grow, you should be investing. However, they do occasionally offer fixed interest deals (there haven't been any in the last few years afaik....).

Like soulsaver says, you need an investment strategy that lets you sleep at night and meets your long term goals. I have a lot more cash than you right now in my SIPP, but I have plenty invested that will meet my long term goals. I could earn more by making my money work harder, but I don't need to and my approach suits my risk profile.

drphila

If you are going to have cash sitting in a SIPP long-term (>1year) there are SIPP deposit accounts that will pay better interest ( eg Close Brothers)

soulsaver

drphila wrote: »

If you are going to have cash sitting in a SIPP long-term (>1year) there are SIPP deposit accounts that will pay better interest ( eg Close Brothers)

Got a link?
If you're waiting for the 'right circumstances', a fixed ac is useless.

grey_gym_sock

investment platforms usually deposit any cash you're holding in a third-party bank. the bank will be paying some interest on this cash to the platform (which they retain), which is part of the reason that you get so little interest (sometimes, none at all).

the interest rates they're getting are not very high, however - not as much as you'd get by shopping around for instant access accounts in your own name. e.g. if you look in HL's own accounts, i think the revenue they retain from cash held on their platform is a bit under 0.5%.

this is not a "scam", but i would argue that this revenue should be better disclosed to customers of platforms.

gmcarthu

I would argue that if these investment platforms are indeed getting 0.5% on my and everyone else's cash, even at 0.5% as grey gym sock says, then it should be included into my portfolio surely ?

0.5% of everyone's cash will add up to a really tidy sum for them !!


Thanks to all