Ever since we launched our website way back in 2010, we’ve been known for publishing a best buy table for SIPP deposit accounts.
In fact, seven years on, it’s still the most popular page on our website.
Over the years, we’ve seen many changes in the SIPP market. But, falling interest rates and a contraction in the number of banks and building societies offering deposit accounts for SIPPs, have been constant themes.
We thought it would be interesting to review the history of interest rates on SIPP deposit accounts over the past few years.
The table below shows just how far they have fallen:
Type of account
1.60% 1.45% 1.00% 1.00% 0.50% 68.75%
One-year fixed rate
2.25% 2.00% 2.00% 1.50% 1.50% 33.33%
Two-year fixed rate
2.50% 2.30% 2.30% 1.75% 1.65% 34%
Three-year fixed rate
2.65% 2.55% 2.55% 1.88% 1.75% 33.96%
Five-year fixed rate
3.00% 2.90% 2.90% 1.95% 2.25% 25%
Our research makes depressing reading for SIPP cash savers.
- There is only one year when the interest rate on an individual account has risen; five-year fixed rates from 2016 to 2017
- That specific instance aside, rates have fallen every year, for every type of account, since 2013
- By far the largest fall has been on instant access accounts, a 68.75% decrease from 1.60% to just 0.50%
- Rates on the most popular fixed-rate accounts have fallen between a quarter and a third since 2013
Why have rates fallen so far?
It isn’t just interest rates on deposit accounts for SIPPs which have fallen; all savings accounts have been affected.
There are two key reasons. Firstly, the Bank of England is keeping interest rates low, even cutting them further last year. Secondly, the government’s Funding for Lending scheme gave banks and building societies a cheaper alternative than savers to raise capital. That meant they could cut their interest rates on deposit accounts.
Interest rates on SIPP deposit accounts are also a victim of relatively low levels of competition, with only a handful of banks and building societies offering their accounts to SIPP savers.
Will the trend reverse?
Unfortunately, we don’t believe it will, at least not in the short term.
If inflation were to rise sharply and the economy continue to remain strong, despite Brexit, it is possible that the Bank of England would be forced to raise interest rates. But, there’s no guarantee that banks and building societies would pass on this increase.
And, savers would have another, equally dangerous threat, to contend with; inflation.
We are here to help
If you would like to know more about SIPPs, or better understand your options for holding deposit accounts in your pension, we are here to help.
Call Bev or Sarah on 0115 933 8433.