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Sipp firms reveal cash margins

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Sipp providers have revealed how they split the interest earned on client bank accounts ahead of a 2017 FCA deadline.

By April providers must show the margin they retain on cash holdings as a charge on Sipp illustrations.

Money Marketing’s research (see table below) shows a wide range in the interest rates firms are able to command and how these are shared with customers.

Some firms pay customers more than they retain – and vice versa – while some keep 100 per cent of the margin.

Barnett Waddingham is paid 0.25 per cent, of which it takes 0.1 per cent with the rest passed on.

Liberty Sipp splits the 1 per cent it receives from Metro Bank equally; Rowanmoor pays 0.5 per cent and is paid 0.45 per cent directly by Metro Bank.

Talbot & Muir keeps 0.85 per cent of the 1 per cent it is paid; while AJ Bell said it is paid a range of between 0.25 per cent below, and 0.6 per cent above base rate. Currently clients are not paid any interest on cash.

@sipp is paid 0.60 per cent and retains it all.

MoretoSipps principal John Moret says: “Providers are pretty twitchy about this still and in some cases are reluctant to disclose. There is more transparency than there was, but it is still not totally transparent. Although the FCA has been pushing quite hard, up until now it has all been a bit of a fudge.”

He adds: “The principle of retaining a margin I don’t have a problem with and I really struggle to see why the FCA have singled out Sipps for special treatment. But I do have some sympathy with the regulator saying ‘actually this is the equivalent of a charge’ and there ought to be disclosure of what that charge is.”

Finaltiq founder Abraham Okusanya says: “Some have argued that if providers pass on full interest on cash to clients, then providers might be forced to raise their prices on Sipps. I seriously doubt the validity of these claims, but at least it’ll be much easier for adviser/clients to make a meaningful cost comparison, and providers who are able to negotiate best terms with the banks, will have a competitive advantage if they pass on all the interest to clients.”

Company Bank Interest rate Split
Barnett Waddingham Bank of Scotland 0.25% 0.15% client/0.1% firm
Liberty Sipp Metro 1% 0.5% client/0.5% firm
Rowanmoor Metro 0.5% client/0.45% firm. Firm says the payments are unrelated.
@sipp Barclays 0.6% All retained by firm
Talbot & Muir Metro 1% 0.15% client/0.85% firm
AJ Bell Bank of Scotland Between 0.25% below and 0.6% above base rate Currently clients receive nothing
Dentons Cater Allen Clients receive 0.1% up to £100k, 0.375% from £100k to £550k, 0.5% on £500k+. Retained margin is never more than client receives.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. This has been a requirement since 6 April 2014 in COBS 13 Annex 4, 1.1 (4)

    (4)

    in relation to a personal pension scheme, the amounts (or if the amounts cannot be given, the formula by which the amounts can be calculated), if any, which a personal pension scheme operator or pension scheme trustee will receive as retained interest in relation to money held within the personal pension scheme.

  2. There is potentially an incentive to adopt practices which involve switching to cash too early. So the firms should also disclose how their processes of switching to cash ( on transfer say ) and how long they tend to hold the cash for on average.

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