James Hay, the UK's self invested personal pensions provider, has warned SIPP investors to check the cash rates they are currently getting on SIPPs.
Market volatility is driving self invested personal pensions provider (SIPP) investors to move segments of their portfolios into cash. James Hay research has shown a rise in importance in cash – with cash comprising over 30% of some SIPP portfolios.
Furthermore, investors making regular pensions payments into the SIPP may not have fully invested funds given the current environment, meaning that funds will sit in cash. However, the rates offered by SIPP providers vary significantly.
With the average SIPP cash balance estimated at GBP46,500, up to 300,000 investors could be missing out on around GBP753 per year between the lowest rates and James Hay’s standard SIPP interest rate or as much as GBP1,618 per year based on the eSIPP special deposit rate of 6.40%.
Chris Smeaton, propositions and ecommerce manager at James Hay, said: Cash rates are rarely focused on in SIPPs. However, in volatile markets, investors frequently asset allocate to the safer havens of cash. In a lower return environment, these differences in cash rates are quite substantial.
As our research shows, around 15% of SIPP portfolios are held in cash, and investors need to consider cash rates when they chose a SIPP. James Hay’s eSIPP now offers a table topping special deposit rate as well as one of the best standard rates, without tiers or catches.