Updated: June 06, 2019

What are the benefits of keeping cash in my SIPP?

Debating whether to hold large cash deposits within your SIPP? This guide outlines all the pros and cons so you can make a more informed choice.

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: June 06, 2019

We get a lot of enquiries from people who would like to know more about the type of cash investments that are available within a SIPP and why a healthy cash fund can be a wise addition to your pension fund.

To answer these questions we have produced this detailed article which covers the following:

What are the benefits of holding cash within a SIPP?

Self invested personal pensions (SIPPs) offer a huge amount of autonomy, control and freedom for you to invest your retirement savings across a huge array of asset classes within a tax-efficient wrapper.

In addition to pooled investment funds, individual stocks and shares, commercial property and government gilts, SIPPs also cater for the most straightforward, liquid asset class – cash.

From basic savings accounts to fixed-term deposits, cash is a popular investment for many SIPP members. There are a number of key benefits to holding cash within a SIPP, such as:

Tax relief on contributions

Any contribution you make to a cash account within a SIPP receives an uplift from the government even if you are a non-taxpayer. For every £100 contribution towards a cash SIPP account a basic rate taxpayer receives an additional £20.

Higher rate taxpayers can claim back a further £20 and additional rate taxpayers a further £25 via self-assessment.

A non-taxpayer can contribute up to £2,880 each year and receive a further £720 in tax relief from the government making a total of £3,600. In effect your cash savings within a SIPP can earn 25% interest purely by making a contribution.

You can read more about the tax implications of a SIPP.

Secure investment

The vast number of asset classes you can hold within a SIPP wrapper is a huge attraction for many people who would prefer to manage their own portfolio. However, many investments can go down as well as up depending on the level of risk attached.

Cash savings are completely secure and will never decrease in value giving you complete peace of mind that this element of your SIPP portfolio will never endure the same level of volatility.


Cash is the most liquid, flexible asset you can hold within a SIPP portfolio. This liquidity offers the advantage of being able to act quickly if the opportunity arises to purchase other asset classes, such as commercial property, within your SIPP fund.

Liquidity is also advantageous if you’ve already started drawing a pension but want to keep some of your funds invested as the cash portion of your fund can be taken out of your SIPP as and when required.

Crystallising gains

During the life of your SIPP portfolio there may be periods where significant gains have been made across a range of asset classes. Whilst your funds remain invested these gains can be reduced through adverse volatility, therefore, it may prove wise to realise the gains by switching these funds, temporarily, into a cash account.

Most SIPPs can be managed online where switching between funds is relatively straightforward and swift. Access to cash accounts would allow you to crystallise any long term gains before making further decisions on where to invest once any volatility has subsided.

This is particularly beneficial if you’re approaching retirement and want to ensure your SIPP pension fund is secure.

If you’d like to understand more about why it could be beneficial to hold cash within a  SIPP portfolio, make an enquiry and we can arrange for a specialist to contact you and discuss further.

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Is a cash only SIPP a wise long-term investment?

Single investment SIPPs (often referred to as ‘Lite SIPPs’) only offer investments in one type of asset class. It is possible to have this type of SIPP purely for cash-based investments.

A SIPP fund is only available for drawdown once you reach at least 55 years of age, therefore, like all other pensions, should be viewed as a long-term investment plan. The benefit of investing across a broad range of asset classes allows for any peaks and troughs to smooth out over the long term.

A cash only SIPP’s performance will be based on the interest rates available and as they are considered low-risk, the potential for growth will not be as high. The detrimental effect in the long-term could be that interest rates are out-performed by inflation which means the actual purchasing power of your cash fund will diminish over many years.

If you’d like to speak with an investment specialist about the benefits of building a balanced portfolio for your SIPP pension, make an enquiry and we can arrange for an advisor we work with to get in touch.

Who are the best cash SIPP providers?

There are a large number of highly-regarded cash SIPP providers available in the UK. Most SIPP providers will offer a full umbrella of different investments and some may specialise purely in cash-based products. A few may also offer a SIPP with a cashback facility for any transfers from other providers.

If you’d like to know more about who the best cash SIPP providers are and which may suit your requirements, get in touch and we can arrange for a SIPP specialist to give you more details.

Which provider offers the best SIPP for cash deposit rates?

With such a large selection of different types of cash accounts available it can be tricky to pinpoint an exact product that would definitely suit your requirements. Perhaps you’re looking for a SIPP offering switching between accounts or simply the best cash deposit rates over a fixed-term.

That’s where we can help. The advisors we work with adopt a ‘whole of market’ approach and will be able to help you source the best SIPP cash rates that specifically suit your requirements.

How do I go about cashing in a SIPP?

You can cash in your SIPP in exactly the same way you would a defined contribution pension.

The scheme’s provider will contact you up to six months before you’re eligible to claim on your pension and given the option to withdraw up to 25% of your pension pot tax free.

Speak to a SIPP expert

The investment strategy you want to adopt with your SIPP is quite important and requires a lot of research. Lots of people in your situation seek professional advice to assist them before proceeding.

If you have questions and want to speak to an expert for the right advice, call Online Money Advisor today on 0808 189 0463 or make an enquiry here.

Then sit back and let us do all the hard work in finding the pensions advisor with the right expertise for your circumstances.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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Tony Stevens

Tony Stevens

Finance Expert

About the author

Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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