Low or no cost SIPP platforms to hold cash?

plumb1_2

Albermarle said:

plumb1_2 said:

Well I’ve only earned £38 interest on £25k in 6 months in my vanguard sipp

Presume until recently they were paying less than 1 %.

Ya it must be paying less with gradual increase as payments have increased slightly.
may £10.27, June£15.24 July £17.99 interest, less fees of course.

isayhello

As you would if it was invested in something surely? Yes, it's possible you'd have some growth to off set that, but you could also have a big loss too.
I'm doing similar to OP. Whilst also saving into a DC scheme at work which is invested, I pay cash into a sipp with a different provider, which just sits as cash. I intend to start using that cash, probably in 2 years time.

@e@eastcorkram not sure I follow but why do you pay cash into the SIPP but just leave it as cash. how do you intend to use it in 2 years time?

eastcorkram

isayhello said:

As you would if it was invested in something surely? Yes, it's possible you'd have some growth to off set that, but you could also have a big loss too.
I'm doing similar to OP. Whilst also saving into a DC scheme at work which is invested, I pay cash into a sipp with a different provider, which just sits as cash. I intend to start using that cash, probably in 2 years time.

@e@eastcorkram not sure I follow but why do you pay cash into the SIPP but just leave it as cash. how do you intend to use it in 2 years time?

How do I intend to use it?
By withdrawing it, and living off it . 

cloud_dog

Rightly or wrongly, I have taken a similar approach for the SIPPs designed to fund early retirement.  I target to have approx 25% invested and leave the remainder as cash.

I am approx 3 years away from 'R-Date', although the recent turmoil has pushed it backwards by a few months at present (still a year ahead of the original plan/schedule)

isayhello

eastcorkram said:

How do I intend to use it?
By withdrawing it, and living off it . 

Oh sorry I might have got confused then as I'm not too familiar with SIPP's, was wondering about the benefit of adding it but leaving it as cash, is it purely to get the tax that is reclaimed and leave it to sit there? or am I missing something else.

eastcorkram

isayhello said:

eastcorkram said:

How do I intend to use it?
By withdrawing it, and living off it . 

Oh sorry I might have got confused then as I'm not too familiar with SIPP's, was wondering about the benefit of adding it but leaving it as cash, is it purely to get the tax that is reclaimed and leave it to sit there? or am I missing something else.

Yes, that's what I'm doing, but it just won't be sitting there for very long.  I could not pay it into the SIPP at all, and save it in a savings account, but then it wouldn't get the tax relief added. I could of course, invest it, and hope to make gains. But it's such a short time frame, I think it's safer to keep it as cash. 

isayhello

eastcorkram said:

Yes, that's what I'm doing, but it just won't be sitting there for very long.  I could not pay it into the SIPP at all, and save it in a savings account, but then it wouldn't get the tax relief added. I could of course, invest it, and hope to make gains. But it's such a short time frame, I think it's safer to keep it as cash. 

Thanks, that helps me understand, also to confirm, there is an income tax that you have to pay when withdrawing though? which brings the benefit down to a much smaller percentage right? Does that still make it attractive enough than going into a savings account?

MallyGirl

isayhello said:

eastcorkram said:

Yes, that's what I'm doing, but it just won't be sitting there for very long.  I could not pay it into the SIPP at all, and save it in a savings account, but then it wouldn't get the tax relief added. I could of course, invest it, and hope to make gains. But it's such a short time frame, I think it's safer to keep it as cash. 

Thanks, that helps me understand, also to confirm, there is an income tax that you have to pay when withdrawing though? which brings the benefit down to a much smaller percentage right? Does that still make it attractive enough than going into a savings account?

There will be tax to pay when you withdraw but how much will depend on your other income. 25% comes out tax free and the rest will be subject to your normal taxation. You won't pay any tax on anything below the £12,750 threshold (across everything in the year).

Albermarle

isayhello said:

eastcorkram said:

Yes, that's what I'm doing, but it just won't be sitting there for very long.  I could not pay it into the SIPP at all, and save it in a savings account, but then it wouldn't get the tax relief added. I could of course, invest it, and hope to make gains. But it's such a short time frame, I think it's safer to keep it as cash. 

Thanks, that helps me understand, also to confirm, there is an income tax that you have to pay when withdrawing though? which brings the benefit down to a much smaller percentage right? Does that still make it attractive enough than going into a savings account?

If you get 20% tax relief on the way in and the max tax you pay on the way out is 15% ( 25% tax free and 75% at 20%) , the tax benefit is 6.25%. So over one or two years you would be better off than keeping it in a savings account outside the pensions. After that it would switch around.
Unless as Mallygirl says you can take the 75% without paying tax ( or some of it) then the tax benefit is higher.

eastcorkram

MallyGirl said:

isayhello said:

eastcorkram said:

Yes, that's what I'm doing, but it just won't be sitting there for very long.  I could not pay it into the SIPP at all, and save it in a savings account, but then it wouldn't get the tax relief added. I could of course, invest it, and hope to make gains. But it's such a short time frame, I think it's safer to keep it as cash. 

Thanks, that helps me understand, also to confirm, there is an income tax that you have to pay when withdrawing though? which brings the benefit down to a much smaller percentage right? Does that still make it attractive enough than going into a savings account?

There will be tax to pay when you withdraw but how much will depend on your other income. 25% comes out tax free and the rest will be subject to your normal taxation. You won't pay any tax on anything below the £12,750 threshold (across everything in the year).

So, as an example, if I was to stop work next April , I could then drawdown the cash from that SIPP, at say £12500 per year for two years. Supplemented as required by using savings. Presume I'd pay no tax for those two years?

Then, reach state pension age, start drawdown of the invested SIPP, and start small DB scheme, all at the same time.