HL SIPP cash 8 December 2022 at 8:04AM in Savings & investments 9 replies 601 views

charlie12525

Looking for a safe haven for the spare cash sitting in my HL SIPP which would give a better return than HL are giving me on cash. I want to keep it in the SIPP and it needs to be an ETF really to avoid HL fees. I don't want to put the cash in a "wealth preserver" type of IT.

One option is XTRACKERS II GBP RATE SWAP UCITS ETF (XSTR). It is an ETF tracking the SONIA total return index which is the rate UK banks lend to each other at.

I bought XSTR with the spare £130 I had in my Investengine account. Over 2 months I am up over 50p.

Not a stellar return but it is relatively risk free and without volatility. Bank rates are increasing and according to the factsheet below the sonia rate is 2.93% at 30 November 2022. The fee is 0.15%pa.

https://etf.dws.com/en-gb/AssetDownload/Index/545fd9e3-742c-445f-a2ac-1f8d75413eee/Factsheet.pdf/

XSTR appears to be a good option but before I buy it in my SIPP does anyone have any views or alternative suggestions? 

Thanks

quirkydeptless

I added some shorted dated Gilts (TG23, TN24, TN25) to mine during the Truss-Kwateng fiasco and Gilts are part of the investments that get capped in a HL HIPP

charlie12525

Yes, I thought about individual gilts... but I don't understand them!

wmb194

charlie12525 said:

Looking for a safe haven for the spare cash sitting in my HL SIPP which would give a better return than HL are giving me on cash. I want to keep it in the SIPP and it needs to be an ETF really to avoid HL fees. I don't want to put the cash in a "wealth preserver" type of IT.

One option is XTRACKERS II GBP RATE SWAP UCITS ETF (XSTR). It is an ETF tracking the SONIA total return index which is the rate UK banks lend to each other at.

I bought XSTR with the spare £130 I had in my Investengine account. Over 2 months I am up over 50p.

Not a stellar return but it is relatively risk free and without volatility. Bank rates are increasing and according to the factsheet below the sonia rate is 2.93% at 30 November 2022. The fee is 0.15%pa.

https://etf.dws.com/en-gb/AssetDownload/Index/545fd9e3-742c-445f-a2ac-1f8d75413eee/Factsheet.pdf/

XSTR appears to be a good option but before I buy it in my SIPP does anyone have any views or alternative suggestions? 

Thanks

The problem with these types of ETFs is the counterparty risk. In this case it's with Deutsche Bank AG and it isn't known as being the strongest credit. For trivial amounts of money I wouldn't worry but for larger amounts I'd think twice.

george4064

wmb194 said:

charlie12525 said:

Looking for a safe haven for the spare cash sitting in my HL SIPP which would give a better return than HL are giving me on cash. I want to keep it in the SIPP and it needs to be an ETF really to avoid HL fees. I don't want to put the cash in a "wealth preserver" type of IT.

One option is XTRACKERS II GBP RATE SWAP UCITS ETF (XSTR). It is an ETF tracking the SONIA total return index which is the rate UK banks lend to each other at.

I bought XSTR with the spare £130 I had in my Investengine account. Over 2 months I am up over 50p.

Not a stellar return but it is relatively risk free and without volatility. Bank rates are increasing and according to the factsheet below the sonia rate is 2.93% at 30 November 2022. The fee is 0.15%pa.

https://etf.dws.com/en-gb/AssetDownload/Index/545fd9e3-742c-445f-a2ac-1f8d75413eee/Factsheet.pdf/

XSTR appears to be a good option but before I buy it in my SIPP does anyone have any views or alternative suggestions? 

Thanks

The problem with these types of ETFs is the counterparty risk. In this case it's with Deutsche Bank AG and it isn't known as being the strongest credit. For trivial amounts of money I wouldn't worry but for larger amounts I'd think twice.

Equally for trivial amounts it probably isn't worth the cost (dealing or on-going platform charges) to buy a cash like ETF/Fund..

wmb194

george4064 said:

wmb194 said:

charlie12525 said:

Looking for a safe haven for the spare cash sitting in my HL SIPP which would give a better return than HL are giving me on cash. I want to keep it in the SIPP and it needs to be an ETF really to avoid HL fees. I don't want to put the cash in a "wealth preserver" type of IT.

One option is XTRACKERS II GBP RATE SWAP UCITS ETF (XSTR). It is an ETF tracking the SONIA total return index which is the rate UK banks lend to each other at.

I bought XSTR with the spare £130 I had in my Investengine account. Over 2 months I am up over 50p.

Not a stellar return but it is relatively risk free and without volatility. Bank rates are increasing and according to the factsheet below the sonia rate is 2.93% at 30 November 2022. The fee is 0.15%pa.

https://etf.dws.com/en-gb/AssetDownload/Index/545fd9e3-742c-445f-a2ac-1f8d75413eee/Factsheet.pdf/

XSTR appears to be a good option but before I buy it in my SIPP does anyone have any views or alternative suggestions? 

Thanks

The problem with these types of ETFs is the counterparty risk. In this case it's with Deutsche Bank AG and it isn't known as being the strongest credit. For trivial amounts of money I wouldn't worry but for larger amounts I'd think twice.

Equally for trivial amounts it probably isn't worth the cost (dealing or on-going platform charges) to buy a cash like ETF/Fund..

The OP says it's with InvestEngine so there will be no dealing commission and with the do-it-yourself account I don't think there are any ongoing fees, either.

I suppose an alternative to using this sort of ETF would be to use a short dated gilt ETF.

https://investengine.com/costs/

charlie12525

Thanks for the replies.

Regarding counterparty risk - isn't it FSCS protected?

And regarding costs - I would be buying in my HL SIPP account. Only the £11 trading fee and bid offer spread to pay. Both minor costs. No stamp duty on an ETF and no platform fee as it is capped and I am already at the cap.

Albermarle

charlie12525 said:

Thanks for the replies.

Regarding counterparty risk - isn't it FSCS protected?

And regarding costs - I would be buying in my HL SIPP account. Only the £11 trading fee and bid offer spread to pay. Both minor costs. No stamp duty on an ETF and no platform fee as it is capped and I am already at the cap.

ETF's are never covered by any FSCS protection.

bd10

I always use Aberdeen Sterling Money Market fund to park uninvested cash. No ETF dealing fee (as I always pay full fare without frequent trading discount) but funds charge of 45bp. Not a get rich quick scheme (only up £48 since purchase). Just habit to pick up safe returns > 0 if available, just like hardly holding any excess cash in non-interest bearing current accounts for daily expenditure.

charlie12525

HL fees on funds would negate the benefit of holding such a fund. I only hold shares, ITs and ETFs with HL where the fees are reasonable for my particular situation.