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

tigerspill

Bravepants said:

Interesting article on Money Market Funds...might be better in the Halifax!:

https://www.morningstar.co.uk/uk/news/195535/should-you-park-cash-in-a-money-market-fund.aspx

Just a quick question on the Halifax.
The SIPP fees seem to be £22.50 / quarter (under £50K).
What I cant seem to find out is whether this is also applicable for deposit (non investment) accounts?  I know some platforms dont charge their fee for cash - just not sure about Halifax. 

Bravepants

tigerspill said:

Bravepants said:

Interesting article on Money Market Funds...might be better in the Halifax!:

https://www.morningstar.co.uk/uk/news/195535/should-you-park-cash-in-a-money-market-fund.aspx

Just a quick question on the Halifax.
The SIPP fees seem to be £22.50 / quarter (under £50K).
What I cant seem to find out is whether this is also applicable for deposit (non investment) accounts?  I know some platforms dont charge their fee for cash - just not sure about Halifax. 

It says nothing in the CostAndCharges.pdf file that can be downloaded. You could give them a phone call to check.

MK62

It says "SIPP value of £50k or less", so as the cash is in the SIPP, I take that to mean the cash is included in the SIPP valuation.

DairyQueen

Update.

'What to do about the SIPP cash' became a catalyst for yet another reiteration of retirement income analysis. The outcome of that was to slightly increase the equity allocation of OH's SIPP using some of the cash, and to decrease the volatility of my SIPP by moving some equities into bonds. This reflects changes to the planned drawdown requirement on each portfolio over the next 5 years. 

There remains a sizeable chunk of cash in each portfolio. I have decided to leave it alone until the end of this year when OH retires. By then, projected expenses and income sources will be easier to estimate. We are moving home this year and  retained dividends anticipated from OH's company are still speculative.

All other things being equal I intend to keep two years drawdown in cash in each SIPP and take the hit on inflation. The rest of OH's cash will be invested in a money market fund.  The potential for a return above cash is small but the experience of researching and using this kind of fund is worth the risk of a potential 0.2% loss (0.1% platform fee plus the 0.1% interest the platform currently pays on cash).

The higher (0.25%) platform fee on my SIPP deters me from moving out of cash. However, I haven't ruled-out the possibility of transferring my SIPP as it holds only three core passives. 

If anyone spots any other alternatives to holding cash (or better rates) then I would be grateful for a post here.

NedS

Thank you for this thread, I have read with interest.

I have been holding large amounts of cash in my SIPP for a while having taken some profits and whilst waiting for a market correction to redeploy. I'm with a popular platform that charges a reassuringly expensive platform fee of 0.45%, so money market funds are not particularly cost effective. For example, a money market fund that returns 0.6%, after the 0.45% platform fee only yields 0.15%, and I'm already earning around 0.25% on the cash, so it would actually cost me money to hold a money market fund. Even after reading this thread, I'm not sure there are any viable alternatives on more expensive platforms although I've not fully investigated ETFs.

Anyway, thank you for the interesting thread!

[Deleted User]

NedS said:

Thank you for this thread, I have read with interest.

I have been holding large amounts of cash in my SIPP for a while having taken some profits and whilst waiting for a market correction to redeploy. I'm with a popular platform that charges a reassuringly expensive platform fee of 0.45%, so money market funds are not particularly cost effective. 

Depending when you moved into cash, you will have lost over 3% since the start of 2020 or over 20% since the start of 2019 vs a typical globally diversified balanced portfolio. Trying to time the market usually ends up costing investors. Particularly so because you have to time it right not once but twice.  Compared to such losses it’s not all that relevant if you “earn” 0.1% or 2% on your cash annually.

NedS

Deleted_User said:

NedS said:

Thank you for this thread, I have read with interest.

I have been holding large amounts of cash in my SIPP for a while having taken some profits and whilst waiting for a market correction to redeploy. I'm with a popular platform that charges a reassuringly expensive platform fee of 0.45%, so money market funds are not particularly cost effective. 

Depending when you moved into cash, you will have lost over 3% since the start of 2020 or over 20% since the start of 2019 vs a typical globally diversified balanced portfolio. Trying to time the market usually ends up costing investors. Particularly so because you have to time it right not once but twice.  Compared to such losses it’s not all that relevant if you “earn” 0.1% or 2% on your cash annually.

The cash in question wasn't invested in a "typical globally diversified balanced portfolio", it was invested in higher risk smaller companies fund that had performed particularly strongly and had more than exceeded my investment objectives when I bought the investment, so it was time to bank those profits. Since taking those profits, I have avoided (saved) a loss of a lot more than the typical globally diversified market has sincee risen, so I am happy with my decision, but I would still like to be able utilise my "dry powder" effectively whilst I hold it in reserve.

DairyQueen

NedS said:

Thank you for this thread, I have read with interest.

I have been holding large amounts of cash in my SIPP for a while having taken some profits and whilst waiting for a market correction to redeploy. I'm with a popular platform that charges a reassuringly expensive platform fee of 0.45%, so money market funds are not particularly cost effective. For example, a money market fund that returns 0.6%, after the 0.45% platform fee only yields 0.15%, and I'm already earning around 0.25% on the cash, so it would actually cost me money to hold a money market fund. Even after reading this thread, I'm not sure there are any viable alternatives on more expensive platforms although I've not fully investigated ETFs.

Anyway, thank you for the interesting thread!

And there lies the rub.

It's a struggle to inflation-proof unwrapped cash given retail rates but SIPP-wrapped cash is a guaranteed loser regardless of platform. Even Minerva wouldn't beat inflation once fees are included.

Whilst accepting that pensions are intended as long-term investments, you describe one common reason for holding a large amount of cash in a SIPP over a relatively short period. My reason is also valid. Neither situation is unusual and yet the majority of mainstream SIPP-providers have ignored this requirement. Their business models don't accommodate cash holdings over any time period.

The question mark over the pricing and function of bonds is now such that I am not alone in querying drawdown strategies that rely on a specific relationship between equities and bonds.

I appreciate that providing too decent a return on SIPP-wrapped cash may encourage people to invest far too cautiously in the accumulation phase but surely the bright sparks that design the business models could invent a product that alleviated this possibility whilst improving the situation for those whose cash is SIPP-trapped for short periods.

I have just begun using HL Active Savings. The rates offered are often close to or match those offered by the best-buys listed on this site, and with the big advantage of single site management. Mr DQ holds a small %age of his portfolio in an HL SIPP (insurance against a technical failure at t'other platform). If only Active Savings were available for SIPP cash. I know, I know. Different market, different legislation, different business model, but those kind of returns would encourage some of us to take a different view of HL's SIPP charges. 

I can but dream.

Audaxer

DairyQueen, you may already be doing this, but just wondering if you and your other half are still paying into your SIPPs each year, as when both retired you can each still pay in £2,880 per year. After the £720 tax relief is added, you could each net £180 after tax if you withdraw the £3,600 cash each by UFPLS. Just thinking that might make up for missing out on interest on the cash you are already holding in the SIPP. As I say, you may already be doing this, or it may not be practical for you, but I thought it worth mentioning for consideration.

tigerspill

Audaxer said:

DairyQueen, you may already be doing this, but just wondering if you and your other half are still paying into your SIPPs each year, as when both retired you can each still pay in £2,880 per year. After the £720 tax relief is added, you could each net £180 after tax if you withdraw the £3,600 cash each by UFPLS. Just thinking that might make up for missing out on interest on the cash you are already holding in the SIPP. As I say, you may already be doing this, or it may not be practical for you, but I thought it worth mentioning for consideration.

Can you put this into a SIPP and take it out in the same tax year?