Chasing best savings rates vs MMF

Pat38493

Since I started paying attention to making a return on any of my money that's held in cash, probably 2 or 3 years ago, my general impression is that you are probably just as well off by shoving the money into an short term money market fund in a GIA or ISA or SIPP.  From what I can see, those funds like the Royal London MMF delivered returns just as good as the best savings accounts, even after taking charges into account.

The only exceptions would be a few headline grabbing higher rates from places like Trading212 which probably don't last very long.

Not sure if anyone has done any more detailed analysis there, but I'd be interested in any opinions one way or the other.  I am coming to the conclusion that chasing savings deals is not worth the bother, and it's better just to use MMF?

On-the-coast

IMO (and i use a RL MMF from time to time), this really comes down to your view of fixed rate savings (1 year, 2 years etc.) and their penalties for early withdrawal, vs the tiny chunk of risk that the MMF could implode.
The fixed rate deals can be higher than MMF... but the MMF reacts quickly to interest rate changes (both good and bad)
If you're after relatively easy access the MMF is a contender, particularly if it's in an ISA.
Though it still takes a day or so to sell the fund, and it's not econonic for very small amounts.

NedS

I agree @Pat38493

I had a couple good deals, but they have ended now and current easily accessible rates are rubbish, so I'm just using the RL Short Term Fixed Income fund for now (slightly higher rates than the ST MMF, and shouldn't fall as fast as rates drop)

swindiff

What do you class as "rubbish" rates?  Trading 212 ISA is 5.17%  It's flexible meaning you can take money out and put it back without reducing your annual allowance and it pays interest daily, I have not tried withdrawing from mine yet but I have read it may take a day or 2.  Tandem savings account is 4.65%, again money can be deposited and withdrawn whenever you want, withdraws are normally back in your nominated bank account within the hour.

LHW99

I find MMF's are usually better than a SIPP's cash interest rate, so useful for collecting spare cash from dividends / sales until ready to re-invest it.

Pat38493

swindiff said:

What do you class as "rubbish" rates?  Trading 212 ISA is 5.17%  It's flexible meaning you can take money out and put it back without reducing your annual allowance and it pays interest daily, I have not tried withdrawing from mine yet but I have read it may take a day or 2.  Tandem savings account is 4.65%, again money can be deposited and withdrawn whenever you want, withdraws are normally back in your nominated bank account within the hour.

I suspect Trading212 is an outlier and a loss leader so I doubt it will be at that rate for long.  I guess part of my thinking is that I don't want to have to keep moving money around to get the best rates, if they are almost negligable improvements vs an MMF. (also I've used up my ISA allowances this year already and the other savings rates outside of ISAs are in the 4.8% range or so which looks like it is pretty much the same as what the MMF is delivering).  I can't see any fixes above 5% right now.

I suppose it depends how much you have to invest - if you have a million pounds even a tiny bit better rate would be important.  The amount I would be investing would be starting at around £200K but after a couple of years, I would probably have about £70K or so as a rolling cash bucket.