Best deal for cash savings in SIPPS

Dicky123

My wife and I both have SIPPs with Hargreaves Lansdown . They are currently largely in cash which is earning a very poor rate of interest. HL cannot offer us a decent rate, say 4% which can easily get with an ISA or straight savings notice accounts. I have looked at other SIPPS providers and they seem the same. We want to stay out of the stock market now, due to our age and the iffy state of the market. In other words we'd settle for 4% or similar and forgo the large percentages available in the stock market if you happen to get things right (whilst missing out on the losses also available).

Can anyone point me to a solution to this problem, please?

r6mile

If you want to stay away from the stock market you could invest in government bonds? Not sure what rate you'd get but I imagine it will be better.

Beddie

You could go for a money market fund, currently paying around 4%:

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/r/royal-london-short-term-money-market-class-y-income

They are very popular at the moment, as interest rates have risen.

Pat38493

Money Market fund could be a good option and is not a stock market investment direclty - I think it is pretty safe.

What kind of size are your funds currently?  You always have the option to divide your amounts into portions e.g. what you will need in the next few years versus  what you need in the longer term and invest different parts differently.

You should keep in mind that investing in cash at low interest rates could also be "iffy" because if inflation is high your money is being eroded, so this is also not an option that is free from downsides.

As to the stock market being "iffy" - I don't think the stock market is behaving any different to normal if you look at it in the long term.  There tends to be significant drops in the stock markets every decade or so which take a year or two to recover, but the general long term trend is still upwards at a rate faster than what you will get from savings accounts.  Depends on the time horizon of your investments.

You could also consider purchasing an annuity with your funds if you are anxious to guarantee your income stream.

Albermarle

and the iffy state of the market. I

The market is always 'iffy' , always was, and always will be , but has still nearly always outgrown cash savings in the long term.

 In other words we'd settle for 4% or similar and forgo the large percentages available in the stock market if you happen to get things right (whilst missing out on the losses also available).

It is a bit of a myth that investing always means big gains or big losses, especially when it is long term. I would say most on this forum ( not all) are really aiming just to beat inflation and then hoping for a bit on top of that.

Plus most keep some in cash as well to varying degrees.

mcc100

The Minerva Sipp from InvestAcc allows cash to be held in selected deposit accounts, with rates currently up to 4.25%, and there is a flat rate annual charge of £400 + vat.

Dicky123

Thanks to all who responded thus far!

We are to reach 78 in the next few weeks (d.v.) so the charts tell us we should, on average, have another 10 years in us.

Our total funds are fairly substantial and are well divided already, the Sipps being a moderate percentage. I am aware that a fund paying 4% whilst inflation is at 9% is losing 5% p.a. But it's only 5%. (I should add that I saw the 2008 financial crisis coming and was entirely in cash in good time.) I have picked up a loathing for local Financial Advisors. I have tried them a couple of times over the years and when, after lengthy meetings, I have analysed what they have recommended, I find that their choices have more to do with their fee levels from the providers than the best options for us!

I quite like the suggestion of the HL Royal London short term money market and will investigate further. Thank you Beddie.

I will also look further at the Minerva Sipp from InvestAcc. Thank you mcc100.

I have just come across InvestmentSense who seem to be able to offer SIPPs with access to various cash funds including NS&I who currently have a Guaranteed Growth Bond paying 4% and no £85,000 security limit as it's covered by the government. Any thoughts anyone?

Pat38493

Dicky123 said:

) I have picked up a loathing for local Financial Advisors. I have tried them a couple of times over the years and when, after lengthy meetings, I have analysed what they have recommended, I find that their choices have more to do with their fee levels from the providers than the best options for us!

It sounds like this is either a good many years ago, or you were using an FA (Financial Advisor) as opposed to an IFA (Independent Financial Adviser).

These days, an IFA is obliged to recommend actions that they believe are in your best interests and they are not allowed to be paid by commission - they have to be paid either by fixed fees or a % of your pot.

That doesn't mean you have to use one though - quite a few of the people on this forum manage things themselves with taking advice on boards like this and from reading books and blogs - there are a few IFAs also active on these boards.

NedS

Dicky123 said:

I quite like the suggestion of the HL Royal London short term money market and will investigate further. Thank you Beddie.

I use the Royal London Short Term Money Market Fund in my HL SIPP. It basically tracks the SONIA rate which is closely linked to BoE base rates, so will float up and down with rate rises and falls. Obviously at the moment rates have been rising so this is a good thing for money market funds, but if rates drop, so will the returns on this fund. That said, 1 and 2 year gilt rates are only 3.5% so you may well be better off in a money market fund than fixing in gilts for the next 1-2 years depending where rates go from here.

This is probably your safest and easiest option in an HL SIPP. Don' forget the HL fees at 0.45% though which will eat into your ~4.0-4.2% return

RetSol

I quite like the suggestion of the HL Royal London short term money market and will investigate further. Thank you Beddie.

Any suggestions for alternatives to the Royal London Short Term Money Market Fund?  There are presumably other, similar funds available? 

Secret2ndAccount

CSH2 - Lyxor Smart Overnight Return ETF
It's an ETF, not a fund. An ETF is more like a share in that you can buy or sell instantly at any time when the market is open. With a fund, you put in your buy or sell order, but the price is only set once per day, and it might take a day or two to learn the exact price at which you traded. For this particular fund, the price is pretty predictable, so there is little difference. Some providers have different charging rates for holding ETF's compared to funds.
CSH2 is cheaper (lower ongoing charges) provided your platform doesn't charge more for holding ETF's