SIPP: Money Market Funds - Home For Short Term Cash?

DairyQueen

We will be front-loading drawdown from two SIPPs for a period of 4 years beginning April next year. I am currently holding the approximate total sum required in cash. Given the paltry returns available on SIPP-wrapped cash, are money market funds a reasonable alternative?

My research so far suggests that money market funds return much less than retail savings rates but beat the cash rates offered by the vast majority of SIPP platforms - especially on sums under £100,000.  The Investecc Minerva (and Lite) seems to be the only SIPP that offers anything like retail rates but one of our SIPPs is crystallised and I only wish to transfer the cash element of both. A complicated process even if possible (unlikely) for a few hundred extra interest over the short term. For the amounts involved (£40k cash in one SIPP and £30k in the other) we are currently receiving 0.1%. The likelihood of a (risk-rated '1') money market fund returning less than that appears minimal to zero and there is a good chance that it will return more.

Anyone else considered this? Have I missed something essential?

AlanP_2

You are a bit ahead of me but I am starting to think about how to handle this when we start on the withdrawal route in 12 -24 months.
Money Market funds are something I'm looking at and also very short dated Bond Funds (<24 months duration maximum, although there ares some with a <12 months remit).

We would have 100% of next 12 months cash requirement outside the SIpp along with approx 50% of our next 12-36 months  requirement in retail accounts / PBs. That would leave about 50% of 12 -36 month requirement inside the SIPP on current planning assumptions. I think you have said elsewhere you are working on 5 years cash, we are working on 3 years as have DB pensions to provide a foundation level of income and this "cash" is the holidays etc. fund in the main.

MK62

I've not used Money Market funds, but a quick glance at Trustnet's Standard Money Market sector shows a couple of funds returning 0.7-0.8% over the last year, ASI Sterling Money Market and Invesco Money, so they could be worth investigating, given your goals.

It's not a recommendation though as I have used neither and so have done no research on them - you would need to research and decide yourself if they are suitable (and if available on your platform(s))

PS....iweb (and I believe the sister platform HSD) give BoE base rate on SIPP cash, currently 0.75%.....true, only half retail rates, but tax free and a lot better than 0.1%

peterg1965

I have a similar predicament, although not yet crystallised.  My money is in an InvestAcc Minerva SIPP and I am wholly invested in SIPP deposit accounts during the run up to withdrawing income.  I have been getting up to 1.95% in two year fixed accounts which is not too bad and a small price to pay for certainty.  Once I start to withdraw I am inclined to keep 3-4 years of 'drawdown pot' in these type of accounts and invest the rest in something like a VLS 40 fund.

george4064

Don't forget that money market funds would attract a platform fee whereas holding cash wouldn't, so you have to consider net of all applicable fees returns when comparing!

MK62

george4064 said:

Don't forget that money market funds would attract a platform fee whereas holding cash wouldn't, so you have to consider net of all applicable fees returns when comparing!

Certainly true for the percentage fee platforms, especially the higher % ones, where the platform fee could wipe out more than half your return (at current levels).
For fixed fee platforms, this isn't really an issue***......dealing fees should be low too as we are only talking one or two buys over 3-4 years.

*** though it still could be if investing into the fund took you into a higher charging tier - though, of course, the opposite could also be true....

green_man

MK62 said:

PS....iweb (and I believe the sister platform HSD) give BoE base rate on SIPP cash, currently 0.75%.....true, only half retail rates, but tax free and a lot better than 0.1%

I confirm the Halifax SIPP pays BOE base rate (0.75%) on SIPP cash, and is a flat fee platform so for higher figures is a decent option IMO.

tigerspill

Great thread.  And some great information so far!  
I am sorting something similar for my OH.
She is planning to contribute to a new SIPP for this, and the next two tax years (when she will retire ay 55).  And withdraw in the three tax years following this before taking het DP pension at 60.
So I am looking for a "cash home" for this.
Obviously there is little time remaining this tax year so Halifax at 0.75% looks like an option.

tigerspill

For those using the Investecc Minerva, how do you go about setting this up?  Can any individual do this or does it need to be part of a company/employee scheme?
I struggled tp find out what "cash" products they offer in their SIPP.  Is there a link to these.  I have read people on here with the two year fixed at 1.95% option, but not sure if this is available.
Also, for something like this do we need the full or lite SIPP - there is a big difference in charges.
Any help with this would be gratefully received.  Thanks

Bravepants

tigerspill said:

For those using the Investecc Minerva, how do you go about setting this up?  Can any individual do this or does it need to be part of a company/employee scheme?
I struggled tp find out what "cash" products they offer in their SIPP.  Is there a link to these.  I have read people on here with the two year fixed at 1.95% option, but not sure if this is available.
Also, for something like this do we need the full or lite SIPP - there is a big difference in charges.
Any help with this would be gratefully received.  Thanks

Yes, you can set up an InvestAcc Minerva SIPP yourself. InvestAcc will be the trustees of the SIPP, but you will have to find out from them who they currently partner with to provide the cash deposit accounts. I applied for the IvestAcc SIPP and then had to complete another form applying for the deposit account, stating that InvestAcc were the trustees. My SIPP cash is held in a 2 year fixed Investec (not InvestAcc!) deposit account at 1.95%.

The SIPP Lite allows only a single product (deposit account or investment fund), but the Full SIPP allows more than one hence the different charges. If you only need the one deposit account then stick with the SIPP Lite.

tigerspill

Bravepants said:

tigerspill said:

For those using the Investecc Minerva, how do you go about setting this up?  Can any individual do this or does it need to be part of a company/employee scheme?
I struggled tp find out what "cash" products they offer in their SIPP.  Is there a link to these.  I have read people on here with the two year fixed at 1.95% option, but not sure if this is available.
Also, for something like this do we need the full or lite SIPP - there is a big difference in charges.
Any help with this would be gratefully received.  Thanks

Yes, you can set up an InvestAcc Minerva SIPP yourself. InvestAcc will be the trustees of the SIPP, but you will have to find out from them who they currently partner with to provide the cash deposit accounts. I applied for the IvestAcc SIPP and then had to complete another form applying for the deposit account, stating that InvestAcc were the trustees. My SIPP cash is held in a 2 year fixed Investec (not InvestAcc!) deposit account at 1.95%.

The SIPP Lite allows only a single product (deposit account or investment fund), but the Full SIPP allows more than one hence the different charges. If you only need the one deposit account then stick with the SIPP Lite.

Thank you for the detail.
Approximately how long did this process take?
Also, with the SIPP Lite, and having a single deposit account - I assume you cant add to this later as the Investecc product is likely a single contribution fund fixed for two years from that date?
I want to make three contributions - one for this and one for each of the next two tax years.  I assume each would be treated as a separate products, and hence would need the Full SIPP.