FIXED Deposits inside of SIPP

setch

I retired just over a year ago and setup a SIPP with the view of investing all my funds in several fixed term deposits. At the time most SIPP operators allowed unrestricted access to all Banks offering fixed term deposits for SIPPS. To me this was a good thing as I have retired and do not want to be exposed to the risks of the ups and down of the stock market. I wanted to able to plan my retirement knowing exactly how much I would be getting on an annual basis. Fixed term deposits fitted this perfectly, but now the FCA have turned this idea into a bad idea.

FCA regulations now say that Fixed Term Deposits that cannot be broken with 30 days notice are nonstandard and as such no SIPP providers are willing to let you invest in anything other than 30 day deposits that have really low interest rates.

This is forcing pensioners to invest their pensions in higher risk investments against their will, With interest rates looking to rise in the very near future, fixed terms deposits would have been an ideal solution for millions of pensioners who are not wanting to take risks

I wrote to the FCA about this and never really got an answer as to why they operate such a restriction on SIPP providers. Would be nice if somebody like Martin could taken this up on behalf of the millions who want to be able to sit back and enjoy their retirement rather than having to worry about the stock market and large fees charged by fund managers.

Wonder how many people agree with my view or am I alone

Setch

HappyHarry

It would be unusual for someone who has just retired to put all their pension funds into cash deposits. Inflation over the rest of a lifetime would be likely to have a hugely detrimental effect on the value of such funds.

If pensioners don't want to take any risks, then they should really look at purchasing an annuity, rather than risk capital, and hence future income, in any investment type, including cash. SIPPs just aren't good vehicles for those looking to avoid risk.

However, there are many more investments available without having to resort to the "ups and downs of the stock market". Might some of these other options be more appropriate?

Malthusian

With interest rates looking to rise in the very near future, fixed terms deposits would have been an ideal solution for millions of pensioners who are not wanting to take risks

Interest rates will only rise if it looks like inflation is going to rise, which means that cash will remain a highly risky investment for anyone who expects to have a SIPP fund invested for more than a few years, due to the near-certainty of suffering large losses due to inflation.

Fixed term deposits are not ideal for "millions of pensioners". They are unsuitable except for an extremely small minority, e.g. those who want to draw down to zero in the course of a few years (e.g. because they have no other income and want to use their personal allowance to draw out the fund tax free).

Pensioners who can not tolerate investment risk should, as HH said, be buying an annuity of some variety.

kidmugsy

There you are, setch, it's all your fault. You were quite wrong to want what you happened to want, and you should be denied it on the grounds that there are other people who might want it too. Naughty boy!

HappyHarry

kidmugsy wrote: »

There you are, setch, it's all your fault. You were quite wrong to want what you happened to want, and you should be denied it on the grounds that there are other people who might want it too. Naughty boy!

I'm fairy certain it's not all setch's fault. However, setch is trying to use a product in a way that it isn't designed for. Such tactics often end in disappointment .

PosterBoy77

HappyHarry wrote: »

It would be unusual for someone who has just retired to put all their pension funds into cash deposits. Inflation over the rest of a lifetime would be likely to have a hugely detrimental effect on the value of such funds.

If pensioners don't want to take any risks, then they should really look at purchasing an annuity, rather than risk capital, and hence future income, in any investment type, including cash. SIPPs just aren't good vehicles for those looking to avoid risk.

However, there are many more investments available without having to resort to the "ups and downs of the stock market". Might some of these other options be more appropriate?

I see the point you are making, but I am not sure annuities are less risky than cash in a SIPP. Many annuities these days have no index linking, so you still have no protection against inflation anyway. If you buy an annuity which does protect against inflation, you pay much more for it.

xylophone

I'm fairy certain it's not all setch's fault.

You've been using your crystal ball?:)

SIPP_Guru

In fact there are numerous SIPP providers that will still accept non standard assets including term deposits (if that's what the chosen investment is) Non standard assets in SIPPs do increase the SIPP providers capital adequacy requirements and as a result the low cost platform based ones wont anymore. Try Dentons, IPM, Barnett Waddingham, SIPPchoice and possibly Curtis Banks