Investors should check the rate of return they are getting for cash deposits held in SIPPs, says Investec Private Bank . Investec warns that investors with SIPPs could be receiving derisory returns on the cash they hold in these wrappers as many accounts have tracked the downward path of the Bank of England base rate(3).
Investec, which is now paying 2.50% above the Bank of England base rate in its Pension and Trust Reserve Account, is urging investors, particularly those with cash balances of £100,000 or more within their portfolios, to ensure that the cash element is held in a competitive deposit account. Recent research(3) has shown a shift towards holding more cash within SIPPs with this asset class now making up more than 35% of some SIPP portfolios.
Despite the recent Bank of England base rate reduction to 0.50%, the Investec Pension and Trust Reserve Account currently pays 3.00%(1) gross AER(2) for balances of £100,000. In November 2008, the comparable rates were 5.0% (BoE) and 5.10% (Investec).
Linda McBain of Investec Private Bank said: “This demonstrates our commitment to providing competitive rates on cash deposits. There are significant differences in the rate of interest paid on cash held in a SIPP. Therefore it’s crucial that investors check they are being paid a competitive rate, particularly during this period of market volatility and as more investors increase the cash element of their SIPP.”
The Investec Pension and Trust Reserve Account provides some of the most attractive cash rates for SIPP and SSAS bank accounts. It offers one month notice to access cash and is supported by an efficient and client focused service. A minimum balance of £25,000 is required, and interest is calculated daily and credited to the account on a monthly or annual basis.
For more information, please call 020 7597 4012.
(1) The rate is subject to variation and correct as at 5 March 2009 on balances over £100 000.
(2) AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once a year. Gross is the interest rate paid before the deduction of tax.
(3) James Hay Limited, September 2008