In the latest of our ‘In the Spotlight’ articles we catch up with Phil Coombes, Head of Intermediary Sales at Leeds Building Society, to talk about SIPP deposit accounts.
Leeds Building Society is a relatively new entrant to the SIPP (Self Invested Personal Pension) deposit account market. What was behind your decision to enter this market?
As the 5th largest mutual building society in the UK we are always looking for new retail opportunities. We researched the SIPPs deposit market and felt it was a very good fit for us, in addition we know this will be a growth area, and with less competition than the normal high street market.
We already have a number of relationships with some of the larger SIPP scheme administrators which is pleasing, and many SIPP providers in the market can now offer more choice & flexible terms on their SIPP products. So it’s a great time to build a good reputation as a SIPP deposit provider and we would welcome speaking to any SIPP providers, Trustee Companies or SIPP scheme administrators about our service.
You currently offer three SIPP deposit accounts; tell us a little more about each of them?
We offer a One Year Fixed Rate SIPP Deposit paying 2.20% Gross§ p.a./AER† (fixed) and a two Year Fixed Rate SIPP Deposit paying 2.40% Gross§ p.a./AER† (fixed) as well as an Unlimited Access SIPP Deposit paying an attractive 1.80% Gross§ p.a./AER† (variable).
All of the accounts can be opened with as little as £100 in contrast to many providers who require a minimum of £25,000 or even £50,000. Even on our fixed accounts we have flexible features such as 25% access to your capital at any time, subject to the minimum operating balance of £100 being maintained.
The longest term fixed rate you offer is for two years, do you believe that SIPP investors are looking for shorter term fixed rates? To put it another way, do you believe that investors are avoiding tying up their capital for longer periods?
There are a lot of uncertainties at this time, and perhaps our maximum two year term is a reflection of that. SIPP investors are certainly more cautious with their investments and may be hesitant to tie up funds for a long time. However even with our fixed term deposits we still allow 25% access to capital (subject to the minimum operating balance of £100 being maintained), giving SIPP investors more flexibility than some traditional fixed rate deposits.
Are you spotting any other trends in the market? For example other banks and building societies we talk to in this market are definitely seeing a trend to deposits not exceeding the FSCS limit.
I wouldn’t say we are seeing a trend of this currently, but there is definitely caution in the market. It’s true that all our accounts are covered by the UK Financial Services Compensation Scheme limit, established under the Financial Services and Markets Act. Payments under the scheme are limited to a maximum of £85,000 of an investor’s total shares and/or deposits in a society.
However, investors should also consider the financial strength of the bank or building society and review their latest financial results and current credit rating. Pleasingly, Leeds Building Society has recorded a 19% increase in pre-tax profits in 2011. In addition, our 2012 interim results this August show that savings balances and membership grew to a record £7.54 billion and 696,000 respectively and we have maintained ‘A’ credit ratings, with both Fitch and Moody’s, despite the very challenging economic environment.
Your interest rates are clearly competitive, what else do you believe SIPP deposit investors are looking for when selecting an account?
Yes our rates are competitive, although we may not always have the best rate compared to some competitors.
Yet experience has told us, that SIPP investors are not always interested in the best rate possible. Quite often their decision is influenced by a smooth application process, having access to flexible, straightforward products and peace of mind that they are dealing with a financially strong building society they can trust.
Leeds Building Society is an independent building society, we’re not part of a larger financial group, which means you know exactly who you are dealing with and where your money is.
Finally, if a SIPP investor wants to open one of your accounts how do they go about it?
Our range of SIPP deposit Accounts are only available to open by the Trustee Company or SIPP scheme administrators. An individual in the first instance should speak to their IFA or their scheme administrator who can check if we either have a relationship with them already or if there is a requirement to set one up.
For details please visit the Leeds Building Society website, by clicking here.
Alternatively SIPP account holders, IFA’s or SIPP scheme administrators can contact our Business Development Manager Simon Murphy firstname.lastname@example.org or telephone 0113 815 0993 and discuss our SIPP deposit account service.
§ Gross means the rate of interest payable before the deduction of income tax at the rate specified by law. † AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and added each year.
Leeds Building Society is authorised and regulated by the Financial Services Authority and our registration number is 164992. You can check this on the FSA register by visiting the FSA website at www.fsa.gov.uk or by contacting the FSA on 0845 606 1234.
Leeds Building Society, 105 Albion Street, Leeds, LS1 5AS
The views expressed in this article are those of the Leeds Building Society.