Interest on uninvested cash in a SIPP?

[BullDog]

In my SIPP and ISA accounts, I let a year of dividend income build up and then draw down in March before the end of the tax year. The interest paid by the investment platform on this cash is pretty derisory. I suppose it's one way they make money for themselves.

However, now that 5% interest is available on the High Street, is there a way for me to get a better interest rate on the money between receiving it and drawing it down? Like from today, there's several thousand pounds that could be getting interest until drawdown in March 2024. But it isn't.

I have looked at various collective investments with cash or money in their names. But it seems they're invested in a portfolio of short dated bonds. I really do not want anything that's not cash getting interest.

Are there any investments you can hold in a SIPP or ISA that are real money invested for interest? Thanks.

[Dod101]

In my SIPP and ISA accounts, I let a year of dividend income build up and then draw down in March before the end of the tax year. The interest paid by the investment platform on this cash is pretty derisory. I suppose it's one way they make money for themselves.

However, now that 5% interest is available on the High Street, is there a way for me to get a better interest rate on the money between receiving it and drawing it down? Like from today, there's several thousand pounds that could be getting interest until drawdown in March 2024. But it isn't.

I have looked at various collective investments with cash or money in their names. But it seems they're invested in a portfolio of short dated bonds. I really do not want anything that's not cash getting interest.

Are there any investments you can hold in a SIPP or ISA that are real money invested for interest? Thanks.

In the tradition of these Boards, this is is not an answer to your question but is there any reason why you cannot withdraw the dividends, at least the ISA ones say monthly? That is what I do. It is a hassle to withdraw them each time they are paid but monthly is no hassle and you can then pay them into an interest paying account? It is more of a hassle with the SIP because presumably dividends arise irregularly and so it would be difficult to set up a regular amount to be paid out each month, and you certainly do not want to have to instruct the managers of the amount each month.

Dod

[swill453]

It is more of a hassle with the SIP because presumably dividends arise irregularly and so it would be difficult to set up a regular amount to be paid out each month, and you certainly do not want to have to instruct the managers of the amount each month.

That's not necessarily as big a deal as it sounds. With AJBell it's simply a case of logging on, entering an amount and clicking OK.

Can do this as often as you like, at no charge.

Scott.

[BullDog]

In my SIPP and ISA accounts, I let a year of dividend income build up and then draw down in March before the end of the tax year. The interest paid by the investment platform on this cash is pretty derisory. I suppose it's one way they make money for themselves.

However, now that 5% interest is available on the High Street, is there a way for me to get a better interest rate on the money between receiving it and drawing it down? Like from today, there's several thousand pounds that could be getting interest until drawdown in March 2024. But it isn't.

I have looked at various collective investments with cash or money in their names. But it seems they're invested in a portfolio of short dated bonds. I really do not want anything that's not cash getting interest.

Are there any investments you can hold in a SIPP or ISA that are real money invested for interest? Thanks.

In the tradition of these Boards, this is is not an answer to your question but is there any reason why you cannot withdraw the dividends, at least the ISA ones say monthly? That is what I do. It is a hassle to withdraw them each time they are paid but monthly is no hassle and you can then pay them into an interest paying account? It is more of a hassle with the SIP because presumably dividends arise irregularly and so it would be difficult to set up a regular amount to be paid out each month, and you certainly do not want to have to instruct the managers of the amount each month.

Dod

Thanks. Cash ISA allowance is already full and I would prefer a once per year drawdown. I might not be able to improve the interest I get in the interim. I'm not aware of anything available, but someone might be.

[simoan]

What you’re asking for is a free lunch in effect. No such thing exists, unfortunately. Your problem stems from an “income only” mindset and the self imposed restriction on how you access the income. If you used a Total Return approach this issue would not exist I.e. reinvest the dividend income and take a combination of any remaining dividend income and capital in March each year.

All the best, Si

[BullDog]

What you’re asking for is a free lunch in effect. No such thing exists, unfortunately. Your problem stems from an “income only” mindset and the self imposed restriction on how you access the income. If you used a Total Return approach this issue would not exist I.e. reinvest the dividend income and take a combination of any remaining dividend income and capital in March each year.

All the best, Si

That plan of course fails when in February the stocks you bought with the accrued dividends drop dramatically.

I'm quite happy to carry on with my mindset, there's no free lunch-ism here.

It seems I was right and there's no simple way of generating interest on accrued dividends without putting the money at some market risk. And that's a non starter.

Thanks for the input.

[simoan]

What you’re asking for is a free lunch in effect. No such thing exists, unfortunately. Your problem stems from an “income only” mindset and the self imposed restriction on how you access the income. If you used a Total Return approach this issue would not exist I.e. reinvest the dividend income and take a combination of any remaining dividend income and capital in March each year.

All the best, Si

That plan of course fails when in February the stocks you bought with the accrued dividends drop dramatically.

I'm quite happy to carry on with my mindset, there's no free lunch-ism here.

It seems I was right and there's no simple way of generating interest on accrued dividends without putting the money at some market risk. And that's a non starter.

Thanks for the input.

The free lunch is that you’re asking a provider to offer a high yielding risk-free investment at zero cost. Who is going to do that?

I understand the income only mindset. It is more natural than the alternative but is wrong IMO. I guess it comes from maybe being overweight income based investments that have little capital growth? Older friends always tell me “there are no pockets in shrouds”. I want to enjoy whatever remains of my life, and that means treating dividends and capital as equally fungible. And I write this as someone that received £40k in dividends last year.

[BullDog]

That plan of course fails when in February the stocks you bought with the accrued dividends drop dramatically.

I'm quite happy to carry on with my mindset, there's no free lunch-ism here.

It seems I was right and there's no simple way of generating interest on accrued dividends without putting the money at some market risk. And that's a non starter.

Thanks for the input.

The free lunch is that you’re asking a provider to offer a high yielding risk-free investment at zero cost. Who is going to do that?

I understand the income only mindset. It is more natural than the alternative but is wrong IMO. I guess it comes from maybe being overweight income based investments that have little capital growth? Older friends always tell me “there are no pockets in shrouds”. I want to enjoy whatever remains of my life, and that means treating dividends and capital as equally fungible. And I write this as someone that received £40k in dividends last year.

Nobody is asking for something you can't get risk free on the High Street. Who does it? High Street and off High Street banks.

There's nothing more to be said really. I would like a High Street type interest rate return on my cash sitting inside my SIPP and ISA. I can't get it. That's all there is to it, but without asking, I didn't know for sure. Thanks for confirming what I thought.

[kempiejon]

That plan of course fails when in February the stocks you bought with the accrued dividends drop dramatically.

I'm quite happy to carry on with my mindset, there's no free lunch-ism here.

It seems I was right and there's no simple way of generating interest on accrued dividends without putting the money at some market risk. And that's a non starter.

Thanks for the input.

I have my SIPP with Hargreaves Lansdown. I let cash acrue when I need to extract cash and want to take off market risk like a year end income withdrawl. I see they currently pay 2.25% on the first 10K and 2.5% upto £50k. https://www.hl.co.uk/charges-and-interest-rates
I wouldn't change providers for such amount but it is risk and cost free to me as an existing customer. I hold an ISA with AJ Bell and they offer 1.15% on cash but rarely see more than a few £k between investment actions so amounts are trivial.

[Dod101]

That plan of course fails when in February the stocks you bought with the accrued dividends drop dramatically.

I'm quite happy to carry on with my mindset, there's no free lunch-ism here.

It seems I was right and there's no simple way of generating interest on accrued dividends without putting the money at some market risk. And that's a non starter.

Thanks for the input.

The free lunch is that you’re asking a provider to offer a high yielding risk-free investment at zero cost. Who is going to do that?

I understand the income only mindset. It is more natural than the alternative but is wrong IMO. I guess it comes from maybe being overweight income based investments that have little capital growth? Older friends always tell me “there are no pockets in shrouds”. I want to enjoy whatever remains of my life, and that means treating dividends and capital as equally fungible. And I write this as someone that received £40k in dividends last year.

Big deal. The amount received in dividends is not relevant. Neither is whether to take an income from dividends or capital. That has been well argued over the years. Bulldog seems to have a mindset similar to mine which is why I was responding. Having no other income than from my investments (except for the State Pension) I have tried various ways of releasing funds to live off but I concluded that the easiest and least stressful way is simply to take dividends as they come, building up a 'buffer' account to allow for the irregular way they are paid. I take ISA dividends more or less as they arise but for SIPP income, I sometimes do not touch it for a couple of years or more but more often I extract some money in March once I know what my tax position for the year is going to be.

Back on topic, I do not think I am as diligent as Bulldog in trying to get good interest on cash balances (probably as a result of our experiences of a decade of virtually no interest) but I will be looking into that. OTOH I have five grand daughters that I like to support from time to time and they can easily absorb any surplus income I have.

Dod

[BullDog]

That plan of course fails when in February the stocks you bought with the accrued dividends drop dramatically.

I'm quite happy to carry on with my mindset, there's no free lunch-ism here.

It seems I was right and there's no simple way of generating interest on accrued dividends without putting the money at some market risk. And that's a non starter.

Thanks for the input.

I have my SIPP with Hargreaves Lansdown. I let cash acrue when I need to extract cash and want to take off market risk like a year end income withdrawl. I see they currently pay 2.25% on the first 10K and 2.5% upto £50k. https://www.hl.co.uk/charges-and-interest-rates
I wouldn't change providers for such amount but it is risk and cost free to me as an existing customer. I hold an ISA with AJ Bell and they offer 1.15% on cash but rarely see more than a few £k between investment actions so amounts are trivial.

HL is more generous towards it's clients then in that respect. Swings and roundabouts. HL's buy and sell charges are way higher than some competitors, for example. Thanks.

[simoan]

The free lunch is that you’re asking a provider to offer a high yielding risk-free investment at zero cost. Who is going to do that?

I understand the income only mindset. It is more natural than the alternative but is wrong IMO. I guess it comes from maybe being overweight income based investments that have little capital growth? Older friends always tell me “there are no pockets in shrouds”. I want to enjoy whatever remains of my life, and that means treating dividends and capital as equally fungible. And I write this as someone that received £40k in dividends last year.

Big deal. The amount received in dividends is not relevant.
Dod

But it is. I could easily live off the natural dividends (and £10K interest) and have the same income based mindset of never re-investing them, but I don't. I don't care where the cash comes from - dividends, interest, share sales etc. it's all equally fungible. It's a different mindset because I don't follow an income based investment strategy. To get paid dividends in April one year and only take them in March the next year without re-investment is wrong IMHO. Either take the dividends as they occur (as you suggested) or re-invest them at least for the first half of the year. What the OP has suggested is the worst of all worlds IMHO. If it works for them, great, but you can't have your cake and eat it, which I think they have now accepted.

[Alaric]

In my SIPP and ISA accounts, I let a year of dividend income build up and then draw down in March before the end of the tax year. The interest paid by the investment platform on this cash is pretty derisory. I suppose it's one way they make money for themselves.

However, now that 5% interest is available on the High Street, is there a way for me to get a better interest rate on the money between receiving it and drawing it down? Like from today, there's several thousand pounds that could be getting interest until drawdown in March 2024. But it isn't. .

Is there any particular reason why uninvested cash cannot be withdrawn from the SIPP and ISA peridocally and placed on deposit until needed the following March? Some Brokers offer umbrella cash accounts where you can choose to place the money within the account to the most suitable deposit taking institution. Additional interest could be taxable, but a net of tax return at market rates is greater than a near zero one.

[BullDog]

In my SIPP and ISA accounts, I let a year of dividend income build up and then draw down in March before the end of the tax year. The interest paid by the investment platform on this cash is pretty derisory. I suppose it's one way they make money for themselves.

However, now that 5% interest is available on the High Street, is there a way for me to get a better interest rate on the money between receiving it and drawing it down? Like from today, there's several thousand pounds that could be getting interest until drawdown in March 2024. But it isn't. .

Is there any particular reason why uninvested cash cannot be withdrawn from the SIPP and ISA peridocally and placed on deposit until needed the following March? Some Brokers offer umbrella cash accounts where you can choose to place the money within the account to the most suitable deposit taking institution.

Thanks. No reason beyond my own laziness. Ad hoc drawdown from a SIPP throughout the tax year is unattractive from a tax perspective, either over or underpaying at each drawdown event. ISA drawdown of course, doesn't have that issue but this thread is mostly about SIPP cash.

I am familiar with HL's cash savings account which is really useful but I don't know of other platforms offering it. I use II and AJB.

[simoan]

Is there any particular reason why uninvested cash cannot be withdrawn from the SIPP and ISA peridocally and placed on deposit until needed the following March? Some Brokers offer umbrella cash accounts where you can choose to place the money within the account to the most suitable deposit taking institution.

Thanks. No reason beyond my own laziness. Ad hoc drawdown from a SIPP throughout the tax year is unattractive from a tax perspective, either over or underpaying at each drawdown event. ISA drawdown of course, doesn't have that issue but this thread is mostly about SIPP cash.

I am familiar with HL's cash savings account which is really useful but I don't know of other platforms offering it. I use II and AJB.

I would at least consider looking at HL Active Savings then for any cash you can withdraw from your ISA. Six month money is getting 4.5% when I looked at the weekend. There are instant access and 9 month savings bond options too from multiple providers. Most of the bonds are £1,000 minimum deposit.

All the best, Si

[kempiejon]

I am familiar with HL's cash savings account which is really useful but I don't know of other platforms offering it. I use II and AJB.

AJ bell offer Cash Savings Hub https://www.ajbell.co.uk/cash-savings#list 4.8% up to 12 months 5.25% fixed 1 year.

[BullDog]

Thanks. No reason beyond my own laziness. Ad hoc drawdown from a SIPP throughout the tax year is unattractive from a tax perspective, either over or underpaying at each drawdown event. ISA drawdown of course, doesn't have that issue but this thread is mostly about SIPP cash.

I am familiar with HL's cash savings account which is really useful but I don't know of other platforms offering it. I use II and AJB.

I would at least consider looking at HL Active Savings then for any cash you can withdraw from your ISA. Six month money is getting 4.5% when I looked at the weekend. There are instant access and 9 month savings bond options too from multiple providers. Most of the bonds are £1,000 minimum deposit.

All the best, Si

I agree. Unfortunately most of my dividends accrue in the SIPP.

[simoan]

I am familiar with HL's cash savings account which is really useful but I don't know of other platforms offering it. I use II and AJB.

AJ bell offer Cash Savings Hub https://www.ajbell.co.uk/cash-savings#list 4.8% up to 12 months 5.25% fixed 1 year.

The trouble with AJ Bell is that not all rates are available directly through their Savings Hub. I applied for a bond and they told me I had to deal direct with the provider (which was some godawful app only account) which completely misses the point of using a single savings portal to manage your money. I told them to stick their Savings Hub where the sun doesn't shine and opened an HL Active Savings account instead. FWLIW I have investment accounts with both so was ambivalent on the best option until I dealt with AJ Bell Savings.

[kempiejon]

The trouble with AJ Bell is that not all rates are available directly through their Savings Hub. I applied for a bond and they told me I had to deal direct with the provider (which was some godawful app only account) which completely misses the point of using a single savings portal to manage your money. I told them to stick their Savings Hub where the sun doesn't shine and opened an HL Active Savings account instead. FWLIW I have investment accounts with both so was ambivalent on the best option until I dealt with AJ Bell Savings.

Well there's a thing. Over the weekend I opened HL Active Savings but haven't yet funded with any cash. When logging on to my portfolio I was prompted to use 2FA. Before I got AS I would only be prompted to use 2FA on new devices or browsers or following a cache clear. As AS is a cash account 2FA is required each time I log on and stay logged in is limited to 5 minutes, I found this to be more annoying than having a trusted device and not needing 2FA wuith every log on. This didn't suit me so I closed the HL active savings account this morning and was going to look at AJB Hub. Thanks for the detail on it not really being a hub. I too have account with both of them perhaps neither will suit me. I can get 5% from other providers and if the savings portals from AJB or HL are not convenient I won't bother.

[simoan]

The trouble with AJ Bell is that not all rates are available directly through their Savings Hub. I applied for a bond and they told me I had to deal direct with the provider (which was some godawful app only account) which completely misses the point of using a single savings portal to manage your money. I told them to stick their Savings Hub where the sun doesn't shine and opened an HL Active Savings account instead. FWLIW I have investment accounts with both so was ambivalent on the best option until I dealt with AJ Bell Savings.

Well there's a thing. Over the weekend I opened HL Active Savings but haven't yet funded with any cash. When logging on to my portfolio I was prompted to use 2FA. Before I got AS I would only be prompted to use 2FA on new devices or browsers or following a cache clear. As AS is a cash account 2FA is required each time I log on and stay logged in is limited to 5 minutes, I found this to be more annoying than having a trusted device and not needing 2FA wuith every log on. This didn't suit me so I closed the HL active savings account this morning and was going to look at AJB Hub. Thanks for the detail on it not really being a hub. I too have account with both of them perhaps neither will suit me. I can get 5% from other providers and if the savings portals from AJB or HL are not convenient I won't bother.

I use 2FA on all my accounts where it's available tbh. I don't mind the inconvenience for the added security, particularly where cash is concerned. It's noticeable that HL do not allow Active Savings access on their mobile app; it's website only. As someone that does not do mobile banking I'm perfectly happy with that, but others may prefer convenience over security. For me, security always wins.