SIPP cash

[Fluke]

I have a SIPP where I've already taken the tax free lump sum, the rest is invested in HYP shares and I'm not ready yet to go into draw down mode. I'm wondering if there is anything I can do with the cash that is building up to earn a better rate of interest. with a S&S ISA for instance you can transfer any cash you might have to a cash ISA, if you want to, for a higher rate of interest if you don't want to lose your tax wrapper. Is there anything similar you can do with a SIPP if you don't want to reinvest in equities?

[Alaric]

Is there anything similar you can do with a SIPP if you don't want to reinvest in equities?

Bond linked ETFs are possibly an option. High Income Pension Accounts are a bit thin on the ground otherwise. It doesn't absolutely guarantee you capital if that matters. SIPP providers seem to pay interest on cash balances not that 0.1% is really worthy of the title.

You could also directly invest into short term Gilts, again returns will not be exciting and the capital value isn't guaranteed if you sell before maturity and if you buy at above par, a capital loss on maturity is a certainty.

(edit) if you've withdrawn the tax free cash sum, it's then outside the SIPP. Did you mean you've deferred transferring the cash out of the SIPP to your personal account? (/edit)

[swill453]

(edit) if you've withdrawn the tax free cash sum, it's then outside the SIPP. Did you mean you've deferred transferring the cash out of the SIPP to your personal account? (/edit)

I presumed it was accumulating dividends.

Scott.

[Fluke]

if you've withdrawn the tax free cash sum, it's then outside the SIPP. Did you mean you've deferred transferring the cash out of the SIPP to your personal account?

No, since taking the tax free lump sum the remaining funds, which are invested in equities, have produced dividends which are now mounting up which are just sitting there earning no interest, withdrawing the cash would incur tax and fees and I don't need it yet, but I don't want to reinvest in equities either. I only mentioned that I'd already taken the TFLS to complete the picture.

I've never bought bonds/guilts before so yes, that is something I could look into. Thanks.

[swill453]

It's useful to have a cash balance when the time comes to take drawdown, as it saves you having to sell anything.

I agree it's annoying there's no simple way to get a return from it in the meantime.

Scott.

[paulnumbers]

I've always been surprised quite how much brokers earn from Interest, it really does seem to be a significant part of their business. For example, Jarvis Securities (X-O)

http://www.jarvissecurities.co.uk/Resou ... SFINAL.pdf

The Jarvis business model has several income streams. These
are primarily commission income, interest income and account
fee income. As such the business is not overly reliant on any
one particular revenue stream.

The interest rate environment has a significant effect on the
earnings of the company. An increase in interest rates would
improve profitability as it would improve income earned on cash
under administration. Conversely, further reductions in interest
rates will reduce profitability.

Gross interest earned from treasury deposits, cash at bank and overdrawn client accounts £3,808,064
Commissions £4,141,315
Fee's £1,474,057

Total 9,423,436

You can see why there hasn't been a rush for brokers to convert their ISA's to flexible ISA's.

[swill453]

They really put an apostrophe in Fee's? Wow.

Scott.

[PinkDalek]

They really put an apostrophe in Fee's? Wow.

Scott.

Not in the linked accounts, no. Interesting extract anyway.

[Stanley117]

I've never bought bonds/guilts before so yes, that is something I could look into. Thanks.

Depending on how shares and funds are charged in your SIPP you could either buy a Bond ETf listed starting with the very low risk cash proxy - ishares Ultrashort Corporate Bond (ERNS) then moving to a slightly higher risk - ishares Corporate Bond 0-5 yr (IS15) then on to ishares Corporate Bond (SLXX).

or you could put regular amounts into a Bond fund OEIC.