Finding the best SIPP deposit accounts can transform the way you manage your pension savings in the UK.

For both newcomers and experienced savers, a deposit account exists as an option within a SIPP.

EveryInvestor has compiled this primer to detail some popular options, highlighting their security features and interest rates.

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What are the best SIPP deposit accounts for retirees?

SIPP deposit accounts suitable for retirees include those offering competitive interest rates, low fees, and flexible withdrawal options.

Accounts with a wide range of investment options can benefit retirees looking to diversify their portfolio.

Look for accounts with a strong track record of performance and excellent customer service to ensure a smooth retirement planning process.

Retirees may also consider accounts with additional features such as online access, mobile banking, and retirement planning tools to manage their funds effectively.

When choosing the best SIPP deposit accounts for retirees, consider accounts that offer tax benefits, such as tax-free growth and tax relief on contributions.

Retirees may also prioritize accounts with no minimum deposit requirements or penalties for early withdrawals.

Accounts with options for income drawdown and phased retirement can provide flexibility for retirees looking to supplement their income while preserving their savings.

Retirees should carefully review the terms and conditions of each account to ensure it meets their specific retirement needs and goals.

What Is a SIPP Deposit Account?

A SIPP deposit account is a special deposit account that can be held in a Self-Invested Personal Pension, in contrast to most personal accounts, which are not eligible for use as part of a SIPP.

Essentially, a SIPP deposit account serves as a place to hold cash within your SIPP. 

Why is it used?

While many people diversify their SIPP investments across various assets (such as equities, commercial property, and cash savings), having a portion of your pension in cash can be beneficial, especially for those nearing retirement who want to reduce risk exposure.

How Does a SIPP Deposit Account Work?

A SIPP deposit account works similarly to a regular bank deposit account, but it is held within your SIPP. 

SIPP deposit accounts operate similarly to regular savings accounts: They pay interest on the funds held within them and often come with added flexibility. 

For instance, you can withdraw funds from the deposit account to invest in other areas within your SIPP if needed.

What Types of SIPP Deposit Accounts Are There?

There are primarily two types of SIPP deposit accounts: fixed-term deposit accounts and flexible deposit accounts. 

Fixed-Term Deposit Accounts

Fixed-term deposit accounts offer a fixed interest rate for a specified period, usually between one and five years. 

Keep in mind

This type of account is suitable for those who do not need immediate access to their funds and are looking to earn a higher interest rate over a fixed term.

Flexible Deposit Accounts

Flexible deposit accounts typically allow varied deposit and withdrawal patterns. 

These accounts usually have variable interest rates and may allow for flexible access to funds. 

What Are the Tax Benefits of SIPP Deposit Accounts?

The tax benefits of SIPP deposit accounts are similar to those of SIPP investments in general. 

When you contribute to your SIPP, the government provides tax relief: For every £80 you pay into your SIPP, the government adds an additional £20. 

Higher rate taxpayers can claim an extra 20% tax relief through their self-assessment tax return, and additional rate taxpayers receive an additional 25%.¹

Interest on SIPP Deposit Accounts

Interest on SIPP deposit accounts varies by provider and account type, with fixed-term accounts usually offering higher rates than flexible accounts. 

What to know:

• SIPP deposit accounts usually pay interest on cash amounts. According to account type and provider, these rates are fixed or variable. Getting a competitive rate requires comparing rates.
• SIPP deposits are stable but have lower interest rates than other investments. Long-term inflation may outpace low-risk cash investments.

What Are the Benefits of SIPP Deposit Accounts?

SIPP deposit accounts offer several benefits, including tax advantages and security. 

A closer look at the benefits of this type of account:

• Tax Advantages: Contributions attract tax relief at your marginal rate, and the interest earned is tax-free.
• Interest: You can earn interest on your cash holdings.
• Security: Your funds are held securely in a deposit account.
• Capital Guarantee: The ‘capital guaranteed’ nature of SIPP deposit accounts is a major benefit. You will not lose your initial cash deposit unless your SIPP provider goes bankrupt, unlike equity-based investments, which may return less than your initial investment.
• Predictable Returns: Returns from SIPP deposit accounts are based on a set interest rate. They are smoother and less volatile than stock market investments, but rates vary by provider and rate type.
• Flexibility: Flexible Deposit Accounts allow you to access your funds whenever needed.

What Are the Drawbacks to SIPP Deposit Accounts?

While SIPP deposit accounts offer several benefits, there are also some drawbacks.

A closer look at the drawbacks:

• Lower Interest Rates: The interest rates offered on SIPP deposit accounts may be lower compared to other investments.
• Inflation Risk: Inflation may erode the purchasing power of your money over time.
• Trade-Off: It is essential to note that SIPP cash interest rates are generally lower than the potential returns achievable through stock market investments.
• Limited Growth Potential: Deposit accounts offer limited growth potential compared to other investment options.

What Are the Best SIPP Deposit Accounts?

The best SIPP deposit accounts offer a blend of low fees, a wide range of investment choices, and user-friendly platforms.

Of course, finding a suitable SIPP deposit account will involve keeping your preferences and financial goals in mind, and the best SIPP deposit account for you may not be the most suitable option for the next person. 

A summary of some popular options may help you find a starting point for your own research.

Mansfield Building Society SIPP Trust Cash Deposit Account – Pension 180 (4^th issue)

This Mansfield Building Society SIPP cash deposit account is a fixed-term deposit account designed for SIPPs.²

Benefits:

• Competitive Interest Rate: Offers a 4,00% AER variable interest rate* for a six-month (180-day) term.
• Short-Term Investment: Suitable for those looking for a medium-term investment.

Drawbacks:

• Limited Access: Funds are not accessible during the 180-day term.
• Fluctuation Risk: The variable interest rate may decrease if the base rate changes.
• Minimum Deposit: You will need to have at least £25,000 to invest.

Cater Allen Fixed-Term Deposit Account for Pensions – 12-Month

Cater Allen offers a fixed-term deposit account that can be held as part of a SIPP.³ 

Benefits:

• Fixed Interest Rate: Offers a competitive 4,50% AER fixed interest rate* for a one-year term.
• Term: Suitable for those looking for a medium-to-long-term investment.
• Number of Holders: This product can have up to four account-holders.

Drawbacks:

• Limited Access: Funds are not accessible during the one-year term.
• Inflation Risk: The fixed interest rate may not keep pace with inflation.
• Minimum Deposit: You will have to invest at least £85,000.
• Term Limit: You will not be able to hold this account for longer than a year.

Buckinghamshire Building Society SIPP 30-Day Notice

Buckingham Building Society offers a short-term SIPP deposit account with a variable interest rate.⁴

Benefits:

• Low minimum deposit: You can contribute as little as £100.
• Interest Rate: A reasonable rate of 2,10% AER* for a shorter fixed-term account.
• Short-Term Option: Funds can be withdrawn after a 30-day notice period.

Drawbacks:

• Limited Access: Funds are not accessible during the fixed term.
• Variable Rate: The interest rate may fall if the base rate changes.
• Interest Adjustment: If your balance drops below £100, your interest rate will drop to a variable rate of 0,10% AER*.

*While we make every effort to provide up-to-date rates information, these figures may have changed since our last update on 10/02/2024. 

What Are the Best SIPP Deposit Accounts for Organisations?

The best SIPP deposit accounts for organisations typically focus on features that cater to the needs of corporate investors, such as cost-effectiveness, a broad range of investment options, and tools for managing multiple accounts efficiently. 

Unfortunately, the specific details regarding SIPP deposit accounts designed for organisations are not as commonly discussed as those for individual investors. 

SIPP providers often tailor their services to individual account holders rather than organisations.

Scottish Widows Pension Fund Deposit Account 2

The Scottish Widows Pension Fund Deposit Account 2 is a deposit account designed specifically for pension funds.⁵

Benefits:

• Security: Provides a secure way to hold cash within your pension fund.
• Low Minimum Deposit: The initial deposit only has to be £500, and subsequent deposits only have to be at least £100.
• Choice: You can request interest to be paid every month, every quarter, or every year.

Drawbacks:

• Interest Rate: Offers a lower annual interest rate than other investment options, namely 1,55% AER*.
• Minimum Balance: Interest is only paid on balances of at least £50,000
• Maximum Balance: Balances cannot be higher than £5,000,000.

United Trust Bank Business 200-Day Notice Issue 2

United Trust Bank’s notice accounts include options for businesses that include a 40-day, 100-day, and 200-day account.⁶

We have taken a look at the last of these.

Benefits

• Competitive Interest Rate: Offers a competitive 5,00% AER variable interest rate* for a 200-day term.
• Short-Term Investment: Suitable for those looking for a short-term investment.

Drawbacks:

• Limited Access: Funds are not accessible during the 200-day term.
• Fluctuation Risk: The variable interest rate may decrease if the base rate changes.
• Minimum Deposit: You will need to have at least £5,000 to invest.
• Interest Risk: If your balance drops below £5,000, you will stop earning interest.

*While we make every effort to provide up-to-date rates information, these figures may have changed since our last update on 10/02/2024. 

How to Choose the Best SIPP Deposit Account for You

To choose the best SIPP deposit account for you, consider:

• Assessing Interest Rates
• Comparing Fees & Charges
• Comparing Flexibility & Accessibility
• Evaluating Customer Service & Support
• Consulting a SIPP Adviser

What Are the Alternatives to SIPP Deposit Accounts?

Alternatives to SIPP deposit accounts include other cash accounts, stocks and shares, bonds, and property. 

Investors often consider diversifying their portfolios as a strategy, taking into account their risk tolerance and investment objectives to guide their decisions.

Common Questions

In Conclusion

While the chase for the absolute ‘best’ SIPP deposit account can be tempting, remember, the optimal choice hinges on your individual needs. 

Prioritise features that align with your goals, whether these include maximising interest rates, securing flexible access, or minimising fees. 

By carefully considering these factors and conducting thorough research, you should be well-equipped to identify the SIPP deposit account that perfectly complements your overall retirement strategy. 

As the investment landscape continues to evolve, staying informed about the latest offerings and how they align with your financial objectives is key to maximising your retirement savings. 

By doing so, you can ensure that you select the best SIPP deposit accounts for your needs.