Cash Options in a SIPP

A client is considering holding a portion of his pension in cash to further diversify his pension and provide the flexibility to draw his pension benefits as required.

The Challenges:

Gerald has a SIPP with Curtis Banks and has recently retired. He is looking to access funds over time from his pension and is considering his options. He is keen to keep some of his fund invested, but also keep a portion held as cash, providing easy access when required.

Gerald believes he will only need to draw an annual income but still requires the flexibility to access other funds if his requirements change at short notice.

Gerald arranges a meeting with his financial adviser Tina to look at the options available within his SIPP to achieve the right balance and meet his requirements going forward.

The Actions:

Tina talks through Gerald’s options for drawdown, and also his investment strategy moving forward. Both Tina and Gerald are keen to retain most of the fund invested as they are happy with the current performance and risk profile. However, Gerald does reaffirm that he would like some of the fund to be relatively easily accessible, depending on his ongoing income requirements.

Tina understands Gerald has always favoured a balanced portfolio and to maintain this whilst achieving the flexibility and security he requires, she agrees that he should consider holding some of the fund in cash.

Tina explains to Gerald that cash is a wide reaching term for a number of investment choices and believes a number of these could support Gerald’s needs.

Tina and Gerald discuss his income requirements, and Gerald confirms he is looking to stay under the basic rate of tax, therefore £10,000 would suffice on an annual basis as well £20,000 as an emergency fund.

Tina explains just because Gerald wants to flexibly access his pension, he does not need his funds to sit in an instant access account earning minimal interest.

Tina confirms there are multiple cash options available, offering security on the balance invested and providing competitive interest rates. Furthermore there is an array of investment providers offering a variety of products including:

• Fixed term accounts
• Notice accounts
• Cash platforms
• Foreign currency

Gerald asks Tina what a cash platform is. Tina explains that cash platforms offer easy access to a wide range of banks and cash accounts. Funds are placed from the pension with the provider, and invested with the chosen lenders (agreed by client and adviser) in return for interest. She adds that platforms may also give clients higher overall FSCS protection by spreading cash across multiple banking institutions. Curtis Banks offer access to two different cash platforms: Insignis and Flagstone.

Tina next explains Fixed Term Bank accounts are widely available from a variety of lenders. Fixed time frames can very from a few months to a few years, potentially meaning amounts could be invested via this method to coincide maturity with annual income payments, she explains these will however be tied in for the chosen period.

Tina also confirms a more flexible cash solution to support Gerald’s requested emergency fund in the form of Notice account. These vary from 30 days upwards, therefore giving quicker access to funds in a short period of time should the need arise.

The Results:

Having considered Gerald’s intentions and the options available, Tina recommends a 12 month fixed term bank account with the intention of maturing in time to pay his annual income.

Tina also recommends a notice account to provide access to funds at short notice. This course of action provides the flexibility and investment security Gerald requested as well as providing improved rates of return compared to the SIPP cash account.

Gerald instructs Tina to disinvest a portion of his SIPP, and place funds in a 12 month fixed term Bank account as well as a 30 day notice account both to be held directly within his SIPP.

Gerald is comfortable with the above and is satisfied this meets his needs whilst providing the peace of mind he was looking for.

This information is based on our understanding of current legislation, including (but not limited to) FCA, PRA and HMRC regulation. It does not constitute any form of advice.