Cash inside pension vs buying a money market fund?

Lifematters

Within a Vanguard SIPP, would it be more prudent to pay into a Money Market Fund rather than leave as cash if retiring within 5 years? Trying to make that decision. 

GazzaBloom

GazzaBloom said:

Lifematters said:

Do Aviva charge for holding cash in SIPP?  Are there any SIPP providers that do not charge for holding cash and pay comparable interest rates? 

I'm not sure, will let you know at the end of January!

Just returning to this thread. I top sliced a little equity fund growth at the end of 2023 and have been accumulating cash with this year’s pension contributions so far. I've now got £25K held as cash inside my Aviva Flexible Retirement Account and I have just checked the March monthly fees, and while it is just a total charge, I ran some calculations using the account balance on that day and it's clear to me that there is no charges on the cash balance as I get the fees to within a few pence by excluding the cash balance.

So, best of both worlds, BOE base rate of 5.25% interest being paid monthly and no annual management charge on the cash that is accumulating.

so, to answer my own question, with this Aviva Flexible Retirement Account, there is no apparent advantage in holding “risk-off” money in the money market fund, just holding it as cash has the upper hand.

I now need to check whether the cash is protected by the FSCS £85K coverage. Aviva's T&Cs aren't specific on where cash balances are held but make mention of a UK bank. I will have more that £85K cash accumulated at the point of retirement though, once I rebalance.

FIREmenow

This is helpful Gazza, just working out a similar debate between cash and MMFs for my parents. I'll have a look whether anyone can open that account with Aviva or if it's for workplace pensions only, and what platform fees we would be looking at. Thank you

FIREmenow

Had a quick look at the Aviva SIPP, in case it's helpful for anyone else. It's different to Gazza's, which is a group pension plan through work.

Platform charge is 0.4% there are also transaction costs, ongoing costs for investments held and an Aviva management cost on some investments.

If staying in cash just the 0.4% platform charge would apply and it says this about cash interest (current interest rate in the linked pdf is 4.53% gross):

https://www.aviva.co.uk/investments/investment-charges/

Interest in your cash account is charged at our variable rate and may be positive, zero or negative. If the interest added is less than the charges taken out, the amount in your cash account will go down. Find out more in our interest rate factsheet (PDF 60 KB).