The Funding for Lending Scheme has continued to push down interest rates on SIPP deposit accounts even further during January, causing more misery for pension savers looking to get a ‘real return’ on their savings.
Perhaps unsurprisingly, there have been no rate increases whatsoever in January, in fact we have seen no rate rises whatsoever over the past three months, as banks and building societies look to the Funding for Lending Scheme to provide a cheaper source of finance than either the wholesale market or customer’s deposits.
Our experience tells us that at least for the time being, SIPP cash investors are sticking with deposit accounts, and are not being tempted to move money into higher risk assets. There is though definitely a trend amongst investors to consider some of the lesser known banks, which whilst being members of the Financial Compensation Scheme (FSCS), were not being as widely used.
Although there isn’t much good news, we thought it would be worth looking at each different type of SIPP deposit account to highlight the best rates currently available and the major fallers over the past month.
Instant Access SIPP deposit accounts
No massive changes to report here, although Leeds Building Society is now top of the table, paying 1.80% with unlimited instant access.
Although there have been no major changes to instant access SIPP accounts, it’s interesting to note though that the ‘premium’ or higher interest rate, for tying money up for longer, is less than at any time since we started producing these tables.
The best one year fixed rate now pays just 0.45% above the best instant access account, whilst if you tie up your SIPP cash for two years the ‘premium’ is just 0.70%; with rates falling weekly, the gap is getting smaller, which is leading to more investors simply holding money in instant access accounts, in the hope that better options will emerge in the weeks and months to come.
Notice SIPP Deposit Accounts
A mixed story when it comes to notice SIPP deposit accounts with the Ipswich Building Society and the Clydesdale Bank both withdrawing their accounts, but replacements from the Melton Mowbray Building Society and the Bank of Cyprus have appeared.
On the whole rates have stayed pretty stable, although the Mansfield Building Society has cut the rate on their 30 day notice account from 2.00% to 1.60%.
Short term fixed rate SIPP deposit accounts
Whilst the Bank of Ireland has cut their rates significantly as have Close Brothers and the Co-Operative Bank, other changes in the short term fixed rate market have been relatively minor.
After a short period out of the market the Bath Building Society has returned with fixed rates for three, six, nine and 12 months. The extra building society is good news for SIPP savers looking for a wider choice, and will hopefully encourage more back into the market.
Longer term fixed rate SIPP deposit accounts (2 – 5 years)
The longer the fixed rate the deeper the cuts, with Bank of Baroda, Bank of Punjab, and Close Brothers all dramatically reducing their rates.
The cuts during January were on four and five year fixed rates with Bank of Baroda cutting 0.75% off their four year deal and 1% off their five year product. Whilst the Punjab National Bank reduced their four and five year fixed rates by 1% and 0.90% respectively and Close Brothers shaved 0.75% and 0.65% off the same periods.
There was some good news though with the Melton Mowbray’s one year fixed rate at 2.10% being added to our SIPP deposit best buy table, as were accounts from the Bank of Cyprus who are offering one, two and three year fixed rates at 2%, 2.15% and 2.25% respectively.
Amidst the gloom, there are also so banks, notably Investec, Permanent Bank International and Scottish Widows, as well as the Leeds Building Society, who have kept their rates on hold during January, and have resisted the temptation to cut rates.
What will February hold for SIPP deposit investors?
Unfortunately we can’t see any good news on the immediate horizon. As banks and building societies continue to benefit from the Funding for Lending Scheme and having, in most part, repaired their balance sheets, we can’t see any reason why they will suddenly start to increase rates on SIPP deposit accounts.
Of course we hope we are wrong and the interest rate cuts we are seeing at the moment won’t deter us from finding the best rates possible for SIPP deposit investors.
Our team of Independent Financial Advisers in Nottingham are experienced in advising SIPP investors on their cash options, if you would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email info@investmentsense.co.uk
