We all know SIPPs can invest in a wide range of assets, from shares to funds, commercial property to gilts.
In addition, just like individuals SIPPs can also invest in deposit accounts.
Some argue that a SIPP should not invest in cash or deposit accounts, I’ll leave that argument for another day; however the fact remains some investors, for whatever reason want their SIPP to invest in Cash
So how do SIPP deposit rates compare to ‘personal’ savings accounts?
The table below compares the best rates we can find on normal deposit accounts, which you and I may take out, with the best comparable SIPP deposit account:
|Type of account||Best non SIPP rate||Best SIPP rate|
|Instant Access||3.01% (including bonus) Nationwide Building Society||2.45% Anglo Irish (International)|
|30 day notice||3.00% (including bonus) Tipton & Coseley Building Society||2.25% Investec|
|1 year fixed rate||3.50% First Save||3.20% Anglo Irish|
|2 year fixed rate||4.00% Principality Building Society||3.70% Close Brothers|
|3 year fixed rate||4.30% Secure Trust Bank||4.25% Nationwide International|
|4 year fixed rate||4.50% Saffron Building Society||3.86% Investec|
|5 year fixed rate||5.05% Birmingham Midshires||4.50% Scottish Widows Bank|
Source: Investment Sense best buy tables 5th May 2011
It’s clear to see that the best non SIPP rates are better on all periods, in some cases by as much as 0.75%.
There could be a variety of reasons for this – fewer banks and building societies offer deposit accounts for SIPPs than for individuals, less competition could certainly be a contributing factor.
In addition to the problem of lower interest rates, there are also a couple of other issues facing you if you have a SIPP and are seeking competitive interest rates.
Firstly, getting information on which accounts are available
You would think in this age of the internet and Google that information on SIPP deposit accounts would be readily available but it isn’t.
Many of the providers of SIPP deposit accounts whilst large are not household names, this means you may never know that they even exist, it isn’t every day for example you walk past a branch of Close Brothers or Nationwide International.
That is why here at Investment Sense we collate details of the best SIPP deposit accounts in our best buy table, which is updated on a regular basis, free to use and completely unbiased.
You can view the table here .
Once you’ve found the deposit account you want to invest in, indeed you may have select a number, you’d think it would be easy, after all you have a SIPP, they can invest in any SIPP deposit account. Right?
This is where the real frustration begins.
Not every SIPP will allow access to every SIPP Deposit Account, some work from a panel and there are even a number of large SIPP providers who will only allow access to one or two accounts.
In this age of technology, openness and transparency, I believe this really is unfair to those people who thought they have bought a flexible product with a wide range of investment options.
If you unfortunately have a SIPP which only offers restricted access to deposit accounts your options are limited. You could speak to your provider to see if they will change their rules, alternatively you could think about moving to a different SIPP provider. A change of SIPP provider is likely to incur set up fees, however it is a good opportunity to compare the annual fees you are paying. As more and more SIPP providers enter the market hopefully the increased competition will push fees downwards.
Selecting the right SIPP is not always easy, information is not readily available in one place and making a like for like comparison is hard; we are working on a solution to this problem, so watch this space.
My last word
If you have a SIPP and want to invest in deposit accounts you are hit from three sides, interest rates are lower than for personal accounts, getting information is hard and not every SIPP will allow access to every deposit account.
Persevere though, search out for the best rates, check whether your SIPP will allow the deposit accounts that you require, if not, do your homework and consider voting with your feet!