SIPP Deposit Accounts: What Are Your Options?

SIPP deposit accounts offer a secure place to hold cash within your pension, earning interest. Options vary in terms of accessibility and interest rates, catering to different investment strategies.
  • Last Updated: 22 Mar 2024
  • Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.

Contributors:

Francis Hui
Curious About the Benefits and Risks? Discover the Intricacies of SIPPS Deposit Accounts and Read About the Best Providers. Find the Answers Here!
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Key Takeaways
  • SIPP deposit accounts are self-invested personal pensions where you have the freedom to select and manage your investments.
  • Opening a SIPP deposit account involves choosing a provider, submitting an application form, and making an initial deposit or transferring funds from another pension scheme.
  • Benefits of SIPP deposit accounts include greater control over your investments, a wide range of investment choices, and potential tax relief.
  • While SIPP deposit accounts typically offer potential for growth, they are subjected to investment risks and there’s a chance you could lose money.
  • The tax implications of SIPP deposit accounts include a 25% tax-free lump sum withdrawal at retirement, with the remainder subject to income tax at your current rate.

With UK interest rates at their highest in 15 years,1 SIPP deposit accounts may be an attractive proposition for people saving for retirement in this unpredictable environment.

In August 2023, the Bank of England upped its base rate again—to 5,25%—and predicted that rates would remain high for at least two years.2

High interest rates are good news for savers, so if your risk tolerance is low, putting cash into SIPP deposit accounts when rates are high could be an option worth considering.

In This Article, You Will Discover:

    Our team at Every Investor has meticulously researched SIPP deposit accounts to keep you informed as you investigate your retirement investment options. 

    All our content undergoes extensive fact checks before publication so we can be sure we’re bringing you the most relevant and useful information. 

    Let’s get straight to it.

    What Is a SIPP?

    Self-Invested Personal Pensions (SIPPs) provide an avenue for investors to actively manage their retirement savings, offering a wide range of investment options.

    What Are the Best SIPP Deposit Accounts for Retirees in the UK?

    SIPP deposit accounts for UK retirees can vary greatly in terms of features and benefits, but a few stand out for their exceptional offerings.

    Fidelity Personal Investing and AJ Bell Youinvest are two top contenders providing a broad range of investment options, low-cost pricing structures and excellent customer service.

    Fidelity’s comprehensive range of funds and AJ Bell’s low-cost share dealing make them attractive for different types of investors. Interactive Investor and Hargreaves Lansdown are two other credible options.

    Interactive Investor offers a fixed, transparent fee structure that can be more cost-effective for larger portfolios.

    Hargreaves Lansdown, on the other hand, is known for its comprehensive research and analysis tools, which can be particularly useful for those who like to make informed investment decisions.

    Remember, the best SIPP deposit account depends on your individual retirement goals, investment preferences, and financial circumstances.

    SIPP deposit accounts are one of the investment options allowed in a Self-Invested Personal Pension (SIPP).

    A deposit account’s a special kind of savings account that allows you to hold a portion of your pensions savings as cash within your SIPP.3

    These accounts are meant for pensions and are set up by your SIPP provider.4

    How Do SIPP Deposit Accounts Work?

    SIPP deposit accounts work much like standard savings accounts, earning interest on the funds held in them. 

    However

    Instead of making direct external deposits into your SIPP deposit account, you’ll have to transfer money from within your SIPP. 

    Good to know

    You usually are notbound to use your provider’s dedicated SIPP deposit account; instead, you’ll be able to select a cash account that best suits your needs.5 

    This isn’t always the case, though, so be sure to check your provider’s terms and conditions before signing your agreement. 

    What Are the Pros of a SIPP Deposit Account?

    The pros of a SIPP deposit account include that it’s suitable for investors close to retirement who are more cautious with their investments and are looking for fairly stable returns.

    Let’s take a quick look at the potential benefits: 

    • Capital guaranteed: Unlike other investments, you won’t lose your initial deposit, so there’s no chance of ending up with less than you put in.6 (Note, however, that while the principal may be guaranteed, the purchasing power of the capital may be eroded by inflation.)
    • Low risk: Deposit accounts offer greater security because performance is less volatile than that of other asset classes.7
    • Stable returns: Whether you’re on a fixed or variable interest rate, deposit accounts offer more certainty on your returns.8

    Of course, these advantages are accompanied by specific risks and drawbacks that need to be kept in mind. 

    What Are the Cons of a SIPP Deposit Account?

    The cons of a SIPP deposit account include potential limitations and risks associated with this investment option.

    These risks and limitations are: 

    • Lower returns: Cash held in a deposit account may not offer the kind of returns investors with a higher risk tolerance are looking for.9
    • Could be incompatible with your investment goals: Deposit accounts may not offer the growth needed to match your long-term retirement goals.10
    • Limited account choices: While deposit accounts can be used as an investment within your SIPP, your provider may not let you use a third-party deposit account that offers better rates.11

    To find out more about how these drawbacks may affect you, speak to a qualified pensions advisor. 

    What Types of SIPP Deposit Account Are There?

    There are two types of SIPP deposit account to consider, namely fixed-term and flexible accounts.12

    SIPP Fixed-Term Deposit Accounts

    With a fixed-term SIPP deposit account, you commit your money for a specified period and, in return, receive a predetermined interest rate.13 

    At the end of this term, you’ll receive back your initial investment along with the accumulated interest.

    Flexible SIPP Deposit Accounts

    Flexible SIPP deposit accounts resemble standard savings accounts, where you’re usually able to deposit more funds and make withdrawals as needed—some may be subject to a notice period. 

    While you do earn interest on these accounts, the rates can change and are typically lower than those of their fixed-rate counterparts.14

    Are SIPP Deposit Accounts Safe?

    SIPP deposit accounts are safe in terms of the capital you put in; however, while the capital may be guaranteed, the purchasing power of that capital may be eroded by inflation.

    Returns will also depend on the account provider’s interest rate. 

    Good to know

    Account holdings up to £85,000 may be protected by the Financial Service Compensation Scheme (FSCS).15

    What is the Criteria to Consider When Looking For a SIPP Deposit Account?

    Criteria to consider when looking for a SIPP deposit account include what the charges and interest rates are, and what the rules and restrictions are.

    A quick look at these factors:

    • Fees & Charges: Fees and charges are always a deciding factor in deciding on an account, because they can affect your returns.16
    • Interest Rates on Returns: Compare interest rates, especially when it comes to accounts with variable rates (as this type of deposit account often offers a lower rate than fixed-rate accounts).17
    • Rules & Restrictions: Some deposit accounts may carry rules and restrictions, such as notice periods and balance limits, that don’t align with your retirement strategy.18

    How Do You Open a SIPP Deposit Account?

    To open a SIPP Deposit Account, you’ll have to go through a few basic steps.

    These steps are:

    • Speak to a Qualified Financial Advisor: Speak to a qualified financial advisor who’ll guide you with regard to product features, fees and risks, and whether a fixed or variable rate would suit you best.19
    • Compare All Available Options & Choose a Provider: Evaluate all potential choices and select the provider that best aligns with your needs.20
    • Submit Required Documents to Open an Account: After choosing the right account, open it and transfer your funds, typically through your SIPP administrator or advisor who’ll handle the required paperwork. 

    How Do You Manage Your SIPP Deposit Account?

    Managing your SIPP deposit account involves understanding the terms of the deposit account, and how those terms may align with your financial goals.

    Monitoring & Adjusting Your Investments

    Market conditions change and your financial objectives can evolve, potentially altering the relevance of a deposit account in your strategy over time.

    Seeking Professional Financial Advice

    A qualified advisor can guide you in making informed decisions that align with both current market conditions and your long-term objectives. 

    How Do You Find the Best SIPP Deposit Account?

    To find the best SIPP deposit account to suit your needs, you’ll have to weigh your needs and priorities against the terms offered by various providers. 

    There’s a handful of providers that offer SIPP deposit accounts, usually as an instant access or fixed-term option. 

    Let’s take a look at some of these options. 

    Cater Allan

    Cater Allan offers a Fixed-term Deposit Account.21

    The features are:

    • Balances: Minimum £85,000 and no maximum balance
    • Interest rate & payments: Fixed-term for one or two years at 4,40% AER
    • Withdrawals & transfers: No withdrawals can be made during the fixed term.

    Scottish Widows

    Scottish Widows offers a SIPP-friendly savings option called Pension Deposit Account 2.22 

    Features include:

    • Balances: Minimum £500 and maximum £5 million
    • Interest rate & payments: Annual variable rate at 1,35% AER, and interest paid monthly (only for balances of £50,000+), quarterly, half-yearly or annually.23
    • Withdrawals & transfers: No notice period required and no interest lost on withdrawals. 

    Mansfield Building Society

    Mansfield Building Society has six deposit accounts that are suitable for SIPPs.24

    SIPP Trust Cash Deposit One/Two Year Fixed Rate Bond:25

    • Balances: £25,000+ for either account
    • Interest rate & payments: The fixed rate at 3,79% AER (one- year) or 4,10% AER (two-year), with interest payable on maturity/after one year or on maturity respectively.
    • Withdrawals & transfers: No withdrawals or early closures allowed.

    SIPP Trust Cash Deposit Easy Access:26

    • Balances: £25,000+ 
    • Interest rate & payments: Variable rate of 1,50% AER payable annually on 31 December.
    • Withdrawals & transfers: You can access your funds at any time, and the money will be paid into a designated bank account.

    SIPP Trust Cash Deposit Account – Pension 30/90/180:27

    • Balances: £25,000+ 
    • Interest rate & payments: Variable rate of 2,00%/2.,50%/3,00 AER respectively payable annually on 31 December.
    • Withdrawals & transfers: Notice of 30/90/180 days respectively, which will be paid into a designated account only.

    Teachers Building Society

    Teachers Building Society has a range of deposit accounts suitable for a SIPP.28

    Easy Access Pension Account:

    • Balances: Minimum £1,000 and maximum £1.5 million.
    • Interest rate & payments: Variable at 1.75% AER
    • Withdrawals & transfers: Can be made at any time with no notice, and your funds will be paid into a designated account.

    Pension 30/90/180:

    • Balances: Minimum £1,000 and maximum £1,5 million
    • Interest rate & payments: Variable at 2,25%, 2,50% and 4% AER respectively
    • Withdrawals & transfers: 30, 90 and 180 days’ notice respectively and your funds will be paid into a designated account.

    Fixed Rate Savings Account:

    • Balances: Minimum £1,000 and maximum £1,5 million.
    • Interest rate & payments: Fixed rate varying from 3,50% to 4,05% AER, depending on the issue.
    • Withdrawals & transfers: No withdrawal during the fixed period.

    Common Questions

    How Do SIPP Deposit Accounts Differ From Other SIPPs?

    Are My SIPP Deposit Account Savings Protected by the Financial Services Compensation Scheme (FSCS)?

    What’s the Difference Between a SIPP Bank Account and a SIPP Deposit Account?

    What’s the Minimum Age to Open a SIPP Deposit Account?

    Can I Contribute to My SIPP Deposit Account if I Have Another Pension?

    Are There Any Limits on How Much I Can Contribute Annually to a SIPP Deposit Account?

    Can I Withdraw Funds From My SIPP Deposit Account Before Retirement Age?

    What Happens to My SIPP Deposit Account if I Pass Away?

    Can I Transfer My Existing Pension Into a SIPP Deposit Account?

    What Are SIPP Deposit Accounts?

    How to Open a SIPP Deposit Account?

    What Are the Benefits of SIPP Deposit Accounts?

    Can You Lose Money in a SIPP Deposit Account?

    What Are the Tax Implications of SIPP Deposit Accounts?

    In Conclusion

    SIPP deposit accounts offer a unique blend of flexibility and stability, making them a valuable option for your SIPP investment mix. 

    They provide a safer haven for individuals with a lower risk tolerance, especially in fluctuating market conditions. 

    Moreover, with the right guidance and understanding, they can effectively contribute to a diversified retirement strategy. 

    When considering your retirement investment options, don’t overlook the potential advantages of SIPP deposit accounts.

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