Cash savings in Pension

Bravepants

I hold Royal London Short Term Money Market in my SIPP, and also Vanguard's Sterling Short Term Money Market fund in my ISA. Both aim to pay the current SONIA rate, which is currently 4.95%. You have to deduct fees from that, so that's 0.55% total for my SIPP in HL and 0.27% for my ISA in Vanguard.

I much prefer STMMF over plain cash, although HL don't charge fees for holding cash in the account, their interest rate on cash is only 3.65% on the amount I have in there. 

I also have no problem holding STMMF longer term as they are very liquid and don't hold long term bonds.

EDIT: Actually just checking the Royal London fund, the factsheet states a distribution yield of 5.13% for the next 12 months. Obviously some of the older 5.2% bonds and deposits are still maturing.

artyboy

Bravepants said:

I hold Royal London Short Term Money Market in my SIPP, and also Vanguard's Sterling Short Term Money Market fund in my ISA. Both aim to pay the current SONIA rate, which is currently 4.95%. You have to deduct fees from that, so that's 0.55% total for my SIPP in HL and 0.27% for my ISA in Vanguard.

I much prefer STMMF over plain cash, although HL don't charge fees for holding cash in the account, their interest rate on cash is only 3.65% on the amount I have in there. 

I also have no problem holding STMMF longer term as they are very liquid and don't hold long term bonds.

EDIT: Actually just checking the Royal London fund, the factsheet states a distribution yield of 5.13% for the next 12 months. Obviously some of the older 5.2% bonds and deposits are still maturing.

Right now, SONIA tracking funds like RL (or CSH2* if you need an ETF version) are about as good an option as you can get in most SIPPs if you want to have a very low risk inflation beating return.  

But that's a relatively recent thing, for most of the past 20 years they would have paid less than the CPI rate, and you'd have been losing money in real terms. 

If you're a few years from being able to access your pension and are happy with the level it's at, then putting 25% into a MM fund could be a good stability hedge. But genuinely long term I'd be wary of...

*CSH2 being a synthetic swap based ETF, so there are other risk factors to consider. Not enough to concern me though.

Tryinghardtosave

Aviva offer a decent rate for cash sitting uninvested in a SIPP - really easy to open one online and it will pay it in every month for you. 

Albermarle

It is worth mentioning that most traditional pension providers ( like Standard Life, Scottish Widows etc) have their own money market funds, almost identical to the RL one and with a similar charge.