All savings in money market funds

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  • jake_jones99
    jake_jones99 Posts: 180 Forumite
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    wmb194 said:
    I currently have a large chunk of my savings in a money market fund tracking the BoE rate. To not worry anymore about banks' generosity on interest rates, I'm considering to move all my savings in that fund. The reason I've been reluctant so far is the bank account has FSCS protection, whilst the fund doesn't. However, the fund has many certificates of deposit which may be insured separately. It's very difficult to communicate with that fund to figure it out. 

    What are your thoughts on this, are there any real risks in putting all your savings in a MM fund? (apart from that the BoE could drop the rate, which I'd keep an eye on anyway).

    Thanks!
    Which fund?

    Of you want something 100% safe for short term money Freetrade now offers access to one month Treasury bills, though note your money's locked for one month as there's no secondary market for them. The current annualised yield on these is c.5.1%.

    https://freetrade.io/treasury
    That makes sense, but they are charging you 0.5% fee so you end up under the BoE rate. I am just wondering, do you have any clue how they're doing this? I'm thinking if the process can be reproduced, unless the have some special access to treasury bills.
  • jake_jones99
    jake_jones99 Posts: 180 Forumite
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    dunstonh said:
    I currently have a large chunk of my savings in a money market fund tracking the BoE rate.
    Which money market style?  Short term only or all versions?

     The reason I've been reluctant so far is the bank account has FSCS protection, whilst the fund doesn't. 
    Which suggests it is an ETF rather than an OEIC.  Although in reality FSCS protection doesn't matter.

    What are your thoughts on this, are there any real risks in putting all your savings in a MM fund?
    Yes. Liquidity being a key on when using MM rather than STMM.





    1. It is a short term MM entitled "Royal London Short Term Money Mkt Y Acc", if you've ever heard of it. The link is  https://www.ajbell.co.uk/market-research/FUND:B8XYYQ8

    2. It's not exchange traded, it's a fund, i.e., you don't get instant quotes. What do you mean by FSCS protection doesn't matter in reality?

    3. It's a STMM, so the liquidity risk should be lower.
  • jake_jones99
    jake_jones99 Posts: 180 Forumite
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    GeoffTF said:
    dunstonh said:
     The reason I've been reluctant so far is the bank account has FSCS protection, whilst the fund doesn't. 
    Which suggests it is an ETF rather than an OEIC.  Although in reality FSCS protection doesn't matter.
    What are your thoughts on this, are there any real risks in putting all your savings in a MM fund?
    Yes. Liquidity being a key on when using MM rather than STMM.
    With regard to FSCS, the issue is that if you deposit your money in the bank and the bank has too many defaults and goes bust, your deposit is protected by the FSCS. If you invest your money in a money market fund, and it faces defaults, you take the loss. There is no FSCS compensation for that.
    Here is the Bank of England and FCA's review of the resilience of money market funds (there are several risk classifications):
    A lot of the holdings of my fund Royal London Short Term Money Mkt Y Acc seem to be in loans to other banks, hence also why it's tracking SONIA the overnight interbank average. So I am thinking that those loans should have some form of protection similar to FSCS. It's really difficult to dig more details about all of the holdings. I called them and when asked more in depth questions I was told to send them a physical letter as they have no email. 

    https://www.ajbell.co.uk/market-research/FUND:B8XYYQ8

  • jake_jones99
    jake_jones99 Posts: 180 Forumite
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    Easy access savings with £85,000 protection= 5%
    Unprotected, at risk of panic selling mmt = 5.2%
    FTSE world etf, unprotected= 16% 
    The mmt doesn't look that good does it.

    Although for many their money will be in a pension or S&S ISA. The rates in the cash accounts here are more like 3/ 3.5% . so a STMM paying 5.2% looks more attractive.

    For non taxed wrapped money, then you are right the difference is marginal for the small extra risk.

    That's exactly my thought. I managed to get most of my savings in a S&S ISA, inside which I bought the Royal London fund.
  • Hoenir
    Hoenir Posts: 2,286 Forumite
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    wmb194 said:
    I currently have a large chunk of my savings in a money market fund tracking the BoE rate. To not worry anymore about banks' generosity on interest rates, I'm considering to move all my savings in that fund. The reason I've been reluctant so far is the bank account has FSCS protection, whilst the fund doesn't. However, the fund has many certificates of deposit which may be insured separately. It's very difficult to communicate with that fund to figure it out. 

    What are your thoughts on this, are there any real risks in putting all your savings in a MM fund? (apart from that the BoE could drop the rate, which I'd keep an eye on anyway).

    Thanks!
    Which fund?

    Of you want something 100% safe for short term money Freetrade now offers access to one month Treasury bills, though note your money's locked for one month as there's no secondary market for them. The current annualised yield on these is c.5.1%.

    https://freetrade.io/treasury
    That makes sense, but they are charging you 0.5% fee so you end up under the BoE rate. I am just wondering, do you have any clue how they're doing this? I'm thinking if the process can be reproduced, unless the have some special access to treasury bills.
    DMO auctions Treasury bills every week to meet short term funding requirements. Freetrade will have access via their broker to participate. Not accessible to the retail market directly. 
  • wmb194
    wmb194 Posts: 3,402 Forumite
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    edited 23 March at 4:06PM
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    wmb194 said:
    I currently have a large chunk of my savings in a money market fund tracking the BoE rate. To not worry anymore about banks' generosity on interest rates, I'm considering to move all my savings in that fund. The reason I've been reluctant so far is the bank account has FSCS protection, whilst the fund doesn't. However, the fund has many certificates of deposit which may be insured separately. It's very difficult to communicate with that fund to figure it out. 

    What are your thoughts on this, are there any real risks in putting all your savings in a MM fund? (apart from that the BoE could drop the rate, which I'd keep an eye on anyway).

    Thanks!
    Which fund?

    Of you want something 100% safe for short term money Freetrade now offers access to one month Treasury bills, though note your money's locked for one month as there's no secondary market for them. The current annualised yield on these is c.5.1%.

    https://freetrade.io/treasury
    That makes sense, but they are charging you 0.5% fee so you end up under the BoE rate. I am just wondering, do you have any clue how they're doing this? I'm thinking if the process can be reproduced, unless the have some special access to treasury bills.
    0.1% if you have one of its paid subscription plans, cheapest of which is £4.99pm, which will also give you an Isa. Whether it's worth it or not depends on how much money you're investing and what else you're investing in and how.

     At the moment this is a unique offering but I'd imagine it could be replicated by other brokers.


  • jake_jones99
    jake_jones99 Posts: 180 Forumite
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    wmb194 said:
    wmb194 said:
    I currently have a large chunk of my savings in a money market fund tracking the BoE rate. To not worry anymore about banks' generosity on interest rates, I'm considering to move all my savings in that fund. The reason I've been reluctant so far is the bank account has FSCS protection, whilst the fund doesn't. However, the fund has many certificates of deposit which may be insured separately. It's very difficult to communicate with that fund to figure it out. 

    What are your thoughts on this, are there any real risks in putting all your savings in a MM fund? (apart from that the BoE could drop the rate, which I'd keep an eye on anyway).

    Thanks!
    Which fund?

    Of you want something 100% safe for short term money Freetrade now offers access to one month Treasury bills, though note your money's locked for one month as there's no secondary market for them. The current annualised yield on these is c.5.1%.

    https://freetrade.io/treasury
    That makes sense, but they are charging you 0.5% fee so you end up under the BoE rate. I am just wondering, do you have any clue how they're doing this? I'm thinking if the process can be reproduced, unless the have some special access to treasury bills.
    0.1% if you have one of its paid subscription plans, cheapest of which is £4.99pm, which will also give you an Isa. Whether it's worth it or not depends on how much money you're investing and what else you're investing in and how.

     At the moment this is a unique offering but I'd imagine it could be replicated by other brokers.


    Even if it's only 0.1% charge, there are cash ISAs giving you 5.06%-5.17%, so I'd go with those instead as the model simpler. Thanks for sharing though!
  • eskbanker
    eskbanker Posts: 31,556 Forumite
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    jake_jones99 said:
    A lot of the holdings of my fund Royal London Short Term Money Mkt Y Acc seem to be in loans to other banks, hence also why it's tracking SONIA the overnight interbank average. So I am thinking that those loans should have some form of protection similar to FSCS.
    What do you mean by that?  Money being lent to other banks doesn't magically acquire FSCS protection, so you just have the same level of FSCS protection as you'd have when holding any other OEIC, i.e. potential reimbursement in the event of fund manager or platform failure.
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