How to get an excellent rate on cash in a SIPP

AlexGreen_2

One of the main problems with a SIPP is most SIPP providers (legally) skim interest on cash.

My SIPP provider, Barclays pays a disgraceful 2.5% below base rates (currently 2.75%) on cash balances less than £15,000. For more than £15k they pay 1% below base rates.

Markets are looking rocky at present but with such low rates plus rising inflation it's hard to keep any meaningful cash on deposit.

But now there's soon to be a really simple way to fight back, keep your money in cash and earn the current interest rate.

Deutsche Bank is about to list an ETF (Exchange Traded Fund) that will track the Sterling overnight interest rate which at present pays around 5.3%. Don't know what the annual management cost will be but I would expect it to be less than 0.3% maybe even 0.15%.

You'll be able to buy or sell this as you would any share, so buying £25,000 would be the same as buying £25,000 of Vodafone but ETFs don't levy stamp duty at 0.5%. Commissions if you use a discount broker will be in the £8 to £12 range.

Another plus for investors is that this ETF can be held in one of the new style 'Stocks & Shares' ISAs so it will be possible to invest up to £7,200 per annum and still theoretically be in 100% cash.

The ETF is not listed yet, should be sometime over the next few months, maybe even sooner. Stay tuned..

darren72

Anyone else heard about this, or have anymore information ?

Thanks

EdInvestor

There are SIPP providers who pay better rates than Barclays, eg

https://www.sippdeal.co.uk

You can also invest in money market funds in most pensions already. M&G has a popular money market unit trust.

It will be interesting to see if the ETF is allowed in stocks and shares ISAs, my guess is it won't be.

darren72

I was meaning the reference to Deutsche Bank paying around 5.3%.

Thanks

AlexGreen_2

EdInvestor wrote: »

There are SIPP providers who pay better rates than Barclays, eg

www.sippdeal.co.uk

You can also invest in money market funds in most pensions already. M&G has a popular money market unit trust.

It will be interesting to see if the ETF is allowed in stocks and shares ISAs, my guess is it won't be.

Don't know where you're getting your interest figures from re sippdeal but I've just checked and they range between 2.5% and 4.25% gross.

Trouble with unit trust money market funds is that they've never going to be as flexible as an ETF.

AlexGreen_2

darren72 wrote: »

I was meaning the reference to Deutsche Bank paying around 5.3%.

Thanks

Darren, just check what the 3 month money rate is and that's what the ETF will pay, minus annual management charge of around 0.1% or 0.15% max.

AlexGreen_2

AlexGreen wrote: »

Don't know where you're getting your interest figures from re sippdeal but I've just checked and they range between 2.5% and 4.25% gross.

Trouble with unit trust money market funds is that they've never going to be as flexible as an ETF.

Sorry EdI, didn't read your post correctly the first time, I thought it suggested that sippdeal pays better than the ETF, whereas you're 100% correct that they pay better than Barclays