Holding cash in pension fund
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I would argue that if these investment platforms are indeed getting 0.5% on my and everyone else's cash, even at 0.5% as grey gym sock says, then it should be included into my portfolio surely ?
Apportioning the interest between individual accounts would be administratively expensive. Buy shares in your fund manager as they are the ones benefitting. More so as interest rates progressively rise.0 -
My wife has a SIPP with Liberty. She too chose to keep the money in cash, as she only wanted it running for 4 years in which time she'd accumulate £50K (of which ten would be from the tax man).
Liberty keep the money in a Metro Bank nominee account which pays 0.3% and Liberty's fees are £210 per year.
Originally she had the money in the Metro Bank 2 year Fixed Rate account which paid a lot more. Unfortunately the rules changed and the money now has to be invested in an account which has a break clause and the only ones that fulfil that are Instant Access ones.
Obviously she could change to HL where she would only earn 0.05% but save on their fees which are fee free for cash deposits. This is something she is considering0 -
Interesting, thanks for that. Close Brothers is here https://www.closesavings.co.uk/sapphire-sipp-fixed-term-deposits.If you are going to have cash sitting in a SIPP long-term (>1year) there are SIPP deposit accounts that will pay better interest ( eg Close Brothers)
However, I found a post on another forum that HL won't allow this (I haven't checked with them).0 -
If you are going to have cash sitting in a SIPP long-term (>1year) there are SIPP deposit accounts that will pay better interest ( eg Close Brothers)
Thanks too for the info. But do those accounts have the break clause that - apparently - is now law for cash held in SIPP accounts. Would any SIPP provider be allowed to use them or can they interpret the rules differently.
When I spoke quickly to HL last week (for my wife) they seemed aware of these rules too.
This was discussed http://forums.moneysavingexpert.com/showthread.php?t=54195540 -
IWebb I believe pays 0.5%; not a lot you say?
Yes, IWEB pay base rate interest on cash balances.
I think anyone would say that's not a lot when CPI inflation is running at 3% and RPI at 4.1%, because you're losing the value of your pension pot.
That's why it is better not to keep large sums in cash in SIPPs unless you're going to be needing the cash in a foreseeable timescale and don't want the risk of the value of investments moving against you temporarily in that time.0 -
I would argue that if these investment platforms are indeed getting 0.5% on my and everyone else's cash, even at 0.5% as grey gym sock says, then it should be included into my portfolio surely ?
we all want to pay lower charges, but platforms need to charge something, or they won't survive.
you're effectively asking for them to have no charges for cash. what's the logic for that? they all have charges for shares and funds (either holding charges, or transaction charges, or both). why should cash be different? if they can't charge for cash, they might well just put up their other charges.
in fact, platforms are making much less money from cash than they used to, because of lower interest rates. and i'm pretty sure they are trying to make that up from other charges. i think that's why it's becoming harder to find accounts where you can hold shares with no fixed or minimum quarterly/annual charges.
i do think that platforms' revenue from cash should be properly disclosed, however. they used to receive undisclosed revenue from fund managers for funds held on the platform, and were forced (by RDR2) to move to explicit charges for funds instead. i think they should be forced to do something similar for cash. e.g. to tell you that the bank is paying 0.5% total interest, and the platform is charging 0.4% for holding cash, so you're only getting a net 0.1%.Thrugelmir wrote: »Apportioning the interest between individual accounts would be administratively expensive. Buy shares in your fund manager as they are the ones benefitting. More so as interest rates progressively rise.
surely they already have systems for paying interest to client accounts. even if some of them have set the interest rate to 0% recently.0 -
I'm in the process of moving my AVC to a SIPP, valued at £80k or so in which I plan to hold it all in cash for 5 years. It will be drawndown from age 55 until age 60, and emptied at a rate equivalent to the basic tax allowance and 25% tax free.
The money I normally pay into my AVC every month from salary will now go towards Added Pension.
I'm not bothered about not earning interest, as it has already made me 20% to 40% by simply paying it in. This fund is my key to retiring at 55 so I don't want to take any risks with it. I have an ISA for that.
This shift to cash in my SIPP is Phase 1 of my 5 year pre-retirement plan.
Phase 2 is buying added pension.If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.0 -
I'm holding cash in my SIPP as part of non-equity holdings and it is there to be used when rebalancing my portfolio to keep my asset allocations in line.
If this was 20 or 30 years ago, when bonds where yielding meaningful amounts, then I would have little (if any) cash but i'm not at all convinced that current government bond prices/yields provide the stability i'm looking for to counteract the potential volatility of equities.
So I don't think it is wrong to hold cash if it is there for a rebalancing reason, rather than cash being there because an investor wants to try and time the market with it.
Happy to be educated on the subject though.0 -
Just giving this one a bit of a bump, as I was looking at my SIPP performance recently and really starting to question whether I would just be better off moving my bond holdings into cash, am I mad?
As volatility has picked up in the market, bond funds don't generally seem to have benefited from a flight to quality in most cases, most bond funds have taken a hit, probably not true of short dated government bonds but the return on them is so small that it will be eaten up by management and platform fees anyway, so I can't see an economic case to hold them at present.
My concern at present is that bonds have lost the supposed historical benefit of moving counter to equity movements in a correction, and their only real diversification benefit looks to be to fall slower in any significant correction, rather than to help offset it.
If that rather bearish view of bonds prevails for the next few quarters is there any reason I shouldn't just be in cash, and at least avoiding platform charges.
Obviously things will change as rates rise so at least short dated government bonds may become economically viable investments again, but this really doesn't feel like a great time to be holding bonds to me as an inexperienced investor, I would welcome any thoughts from anyone on whether I am missing something!0 -
I am not going to pass judgement on whether it is wise to hold cash in a SIPP or not. Everyone has to make their own decisions. If there was a stock market crash tomorrow, those holding cash today would be pretty happy.
I have 3 low cost SIPPs, one to just hold cash. The best way I have seen to hold cash is to setup a SIPP lite account with InvestAcc and then you can deposit cash with almost any bank which offers deposit accounts for SIPPs. The annual fees for the SIPP lite is quite low. They charge a £95 setup fee and £195 per year. Quite a number of banks offering fixed term deposits will allow them to be used for SIPPs. You can find a full list which get updated at the investmentsense website.0
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