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McPhail in warning on misleading Sipp rates

Consumers should watch out for misleading interest rates within Sipps, says Hargreaves Lansdown head of pension research Tom McPhail.

He points to Killik which advertises an interest rate on cash balances of 5.25 per cent but this is for a UBS money market fund within the wrapper and Killik actually pays 2.75 per cent on amounts 10,000-50,000 and 4.25 per cent on amounts above this.

The issue illustrates the variation in interest paid on cash balances within Sipps which vary by over 50 per cent. The balance on pension funds of 25,000 or more can earn between 2.875 per cent and 4.15 per cent while bigger pots of more than 100,000 will earn interest of 2.875-4.35 per cent interest, depending on the provider chosen.

Recent research from Pensions Associates reveals that the 4.35 per cent it offers Sipp customers on balances of 100,000 or more is more than half as much again as the 2.875 per cent offered by Winterthur Life and Capita, as at the start of the year.

McPhail says: “Not all information about interest on cash is clear and the rates do not always inc- lude charges.”

Killik marketing director Philip Browne says: “We offer a range of cash funds for people who want it as a strategic element of their portfolio.”

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