SIPP Cash Deposit Accounts

SIPPs – otherwise known as self-invested personal pensions – are flexible pension products designed to give you greater control over where you invest your retirement pot. But what if you want to keep part of your funds in cash? That’s where a SIPP deposit account comes in.

This guide will take you through everything you need to know.

What is a SIPP deposit account?

Many people opt for a mixture of SIPP investments, across a range of different types of assets such as equities, commercial property, and cash savings when building their pension pot, with the latter particularly popular for those nearing retirement who want to reduce their risk profile. This means they’ll need a specific savings account in which to keep the cash portion of their pension – a SIPP deposit account.

How do they work?

SIPP deposit accounts operate much like any other savings account, in that they pay interest on any funds held within them and often come with added flexibility, such as the ability to withdraw funds – in order to invest in other areas within your SIPP – should you wish.

They’re purely used for pension savings – which must be transferred from your SIPP – but crucially, you don’t always have to use the default account offered by your pension provider, unless they restrict access to third-party accounts. This means you’re free to compare the options available to find the account that works for you.

Why get a SIPP deposit account?

SIPP savings accounts are “capital guaranteed” – in other words, there’s no risk of losing your initial cash deposit, except in the unlikely event of your SIPP provider going bust.

This is quite the contrast to equity-based investments where your returns can fall as well as rise and you may end up with less than you put in. This can offer greater security for those with a lower risk appetite and who don’t want to expose their pension fund to riskier assets and potential losses.

Returns are also guaranteed in that they’re based on a set interest rate, though these can also change depending on the provider and whether you’ve got a fixed or variable rate of interest. Nonetheless, returns tend to be smoother and less volatile, which can be preferred by some pension holders.

However, it’s important to bear in mind that SIPP cash interest rates tend to be lower than the potential returns achievable on stock market investments, albeit with the trade-off of cash having much lower risk. It’s vital to decide whether this kind of account will work for your retirement goals, which is why it’s recommended to speak to a specialist pensions advisor for the necessary support.

Types of account available

There are generally two types of account to choose from – fixed term and flexible.

• SIPP fixed term deposit accounts are much like fixed rate bonds, in that you agree to deposit your funds for a set length of time in return for a fixed rate of interest. Once the term comes to an end, you’ll get your original investment returned to you, plus any interest earned.
• Flexible deposit accounts are more like easy access or notice savings accounts, typically allowing you to add additional funds to your pot and withdraw them when you wish (while adhering to any notice agreements, if applicable). You’ll still receive an interest rate and therefore a guaranteed return, though this will normally be variable and as such can fluctuate, and will typically be lower than fixed rates as well.

How to open a SIPP deposit account

Finding the best account for your needs

The account that’s right for you will often come down to personal preference. For example, are you willing to lock your money away in return for a better rate, or would you prefer something with more flexibility? Would you like the ease of staying with your pension provider or would you rather look elsewhere?

There are a lot of additional factors you may want to consider as well, such as:

• Fees. The fees and charges involved should play a huge part in your decision, as they have the potential to eat into any returns you make.
• Rates. You always want to get the best returns possible, but it isn’t always simple to find the best SIPP cash interest rates. This is particularly the case with variable rate accounts as the interest can fluctuate, so it’s important to speak to an advisor who’ll be able to help you track down the best deals.
• Rules and restrictions. Some accounts have rules and restrictions which may not fit in with your overall pension strategy, so it’s important to always read the small print to make sure it will work for you.

Which providers offer the best SIPP deposit accounts?

There aren’t a huge number of SIPP deposit account providers to choose from, which means your choices may be limited. Though that’s not to say providers are impossible to come by. Some options include Santander (through their Cater Allen private banking arm), Close Brothers Savings, Scottish Widows and Mansfield Building Society, though bear in mind that products can be withdrawn at any time.

Remember too that some SIPP providers won’t allow you to access third-party accounts, so you may be even more restricted. Again, it’s wise to speak to an advisor who’ll be best-placed to help you find suitable providers.

Speak to a pensions advisor who specialises in SIPPs

If you’d like to find out more about SIPP deposit accounts and want an expert pensions advisor to talk you through your options, we can help. We’ll put you in touch with a regulated, independent advisor who can offer a free pensions review, helping you determine if this kind of account is right for your retirement goals.

Just call us on 0808 189 0463 or make an enquiry and we’ll match you with the expert to help.