SSIP short term cash option

clueless87

Hi,

I have some annual allowance left for this tax year. I will take the money out early next tax year. Is there a low risk cash option or do I need to invest in a fund?

Linton

I assume you mean SIPP.

Leaving the money in cash should not be a problem, as far as I know all SIPP platforms support it.

Do you have a SIPP open at the moment? Presumably not otherwise you would know the answer to your question.
If you do have a SIPP, have you taken money out of this SIPP before?
Are you just taking 25% tax free or a taxable lump sum as well?

There could be tax delays and other issues which can be explored if you can provide more detail.

NedS

Most major fund houses provide short term money market funds which are now paying decent interest rates, typically around the BoE base rate (less fees). See here for some options:

https://forums.moneysavingexpert.com/discussion/6421073/where-to-hold-cash-in-a-sipp-or-s-s-isa

clueless87

Hi Linton, NedS thanks for your replies.

I have a company DB pension and left work part way through the tax year, I was unable to put extra money into my DB scheme so have annual allowance unused. I was hoping to put some cash in a SIPP and take the 25% cash free sum and 1/2 of the remaining money out next tax year (23-24) and the rest the year after. I’m 55 in May 23 so will access the money from the SIPP then. I intend to take some of my DB pension as a tax free lump sum and I don’t think the SIPP will impact this. I have no other pensions. 

NedS

Great, so you can pay in up to your allowable limits before April, and then withdraw up to your personal tax free limit over the next two years to withdraw the cash. In that scenario it makes perfect sense to invest in an extremely low risk money market fund given the short term nature.You will need to liquidate sufficient cash a week or so before requesting the withdrawal but at least you'll be getting some interest in the meantime.

midlandsimon

Most SIPP providers cash accounts pay a level of interest. I know my SIPP pays 1.5% on all its SIPP cash account balances. You can open external deposit accounts within your SIPP with any UK bank/building society. These range from easy access/notice and fixed term options. 

Albermarle

 You can open external deposit accounts within your SIPP with any UK bank/building society. 

The main/well known retail SIPP providers do not offer this facility, only some more specialised/smaller providers.

However as you point out, most SIPP providers are paying interest directly on cash balances . At least one is paying over 3%.

 I was hoping to put some cash in a SIPP and take the 25% cash free sum and 1/2 of the remaining money out next tax year (23-24) and the rest the year after.

Once you take some taxable income from the SIPP ( it does not matter whether you actually pay tax on it or not), you will be restricted in future to paying in a maximum of £4K pa into a pension . This may or may not be an issue for you.

midlandsimon

Abermale- Disagree there on the first point. The larger SIPP providers including Curtis Banks/ InvestAcc/ Hornbuckle all allow access to external deposit accounts. Agree your likes of ii/HL etc wont but majority of full rather than platform SIPP providers will. 

Albermarle

midlandsimon said:

Abermale- Disagree there on the first point. The larger SIPP providers including Curtis Banks/ InvestAcc/ Hornbuckle all allow access to external deposit accounts. Agree your likes of ii/HL etc wont but majority of full rather than platform SIPP providers will. 

Yes you are right but the large majority of SIPP investors are with the likes of ii/HL etc and having a Full Sipp is more of a niche activity. For example until you mentioned Hornbuckle, I had never heard them ever mentioned on this forum before.