Money markets

dont_use_vistaprint

How do people use these like the Royal London short-term money market which looks like it’s been paying 4.6% though I guess going forward, it’s gonna be more like 3 1/2 to 4% ?

do you use them as an alternative to ISA savings, or for the short term between changes in your investments while you are waiting for a favourable price? Or long-term super low risk with the tax benefits of a SIPP?

i’m interested to know why and when people would use these as part of an investment strategy 

also, are there any differences between the Royal London and the Vanguard short terms? and what is an example of a medium term money market ? I cannot find any on interactive investor.

DavidT67

Holding some money in GIA from a property sale whilst deciding on next property to buy.  Holding money in SIPP for planned current year drawdowns.  

Differences are in frequency of interest payments.  Monthly vs. half yearly.

Royal London offer Fixed income funds which aim to exceed SONIA returns.  

SVaz

We use them in our Sipps to hold the cash that will be our income for 5 years until SP age .
It gets a better rate than cash held in the Sipp would.  

Fingers crossed that sonia rates stay at 3% or higher. 

If they drop under 3% then my gamble on not buying Gilts instead will have failed but in reality doesn’t make that much difference. 

NormalNorman

Currently doing a bit of an experiment.

As the SIPP is with HL which was 100% was invested in the VWRL ETF. ETFs reduce fees considerably on HL.

Anyway, as possible retirement is three odd years away probably best to reduce risk. As a result of a recent transfer into HL 5% is now in CSH2. Over the next few years I'd like the lumpsum to be 'protected' leaving the remainder to grow as two DB schemes will also kick in then.

Time will till, cheers!

On-the-coast

dont_use_vistaprint said:

How do people use these like the Royal London short-term money market which looks like it’s been paying 4.6% though I guess going forward, it’s gonna be more like 3 1/2 to 4% ?

do you use them as an alternative to ISA savings, or for the short term between changes in your investments while you are waiting for a favourable price? Or long-term super low risk with the tax benefits of a SIPP?

i’m interested to know why and when people would use these as part of an investment strategy 

also, are there any differences between the Royal London and the Vanguard short terms? and what is an example of a medium term money market ? I cannot find any on interactive investor.

I use them in a S&S ISA... for parking money if i haven't decided what to do with it.
It gives a better rate than many flexible Cash ISA's, and better than leaving cash floating in your GIA or S&S ISA

Albermarle

As above, just somewhere to park cash in a SIPP/ISA, where you get a better rate than just leaving it as cash in the account. In the last 12 months the Sonia rate has been above inflation. So a real return with almost no risk.

Also worth noting that if you have a pension with a traditional insurer ( like Scottish Widows, Standard Life etc) they have their own STMMs .

Bostonerimus1

dont_use_vistaprint said:

How do people use these like the Royal London short-term money market which looks like it’s been paying 4.6% though I guess going forward, it’s gonna be more like 3 1/2 to 4% ?

do you use them as an alternative to ISA savings, or for the short term between changes in your investments while you are waiting for a favourable price? Or long-term super low risk with the tax benefits of a SIPP?

i’m interested to know why and when people would use these as part of an investment strategy 

also, are there any differences between the Royal London and the Vanguard short terms? and what is an example of a medium term money market ? I cannot find any on interactive investor.

My MMF is a place I hold my cash allocation and a place to put cash whenever I sell an investment before using it for something.

tigerspill

So do these investments generally outperform traditional savings accounts (unwrapped in ISA or SIPP)?

LHW99

AFAIK MMF's do not necessarily beat traditional cash savings accounts, but it depends on the account. Big 6 Bank instant access savings are almost certainly giving a lower rate of interest, but fixed rates may well be above MMF returns.

I use the RL MMF to accumulate dividends within a SIPP to make a single larger investment in one go and / or accumulate a cash balance (for TFLS) and / or to hold some fire power pending a drop in the market / a particular fund I am interested in.

Albermarle

tigerspill said:

So do these investments generally outperform traditional savings accounts (unwrapped in ISA or SIPP)?

Most pensions and all? S&S ISA's do not allow you to hold cash in a traditional savings account within the pension/ISA.
So if you want to hold cash within a pension or S&S ISA, you have to leave it in the cash account ( Interest % varies from provider to provider but is normally not that great) or use one of these STMM funds to get a better rate.

There are a few specialist SIPPs where you can in fact hold money in a limited range of savings account within the SIPP, but these are the exception rather than the rule.

MetaPhysical

They're good to park cash into in an ISA or SIPP for diversification rather than just leaving it in real cash as a balance in your account.  Still carries a small risk though.   Also they're no good for a GIA though if you have to pay 40/45% tax.  That's where low coupon gilts come into their own.