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The Independent UK
The Independent UK
National
Lori Campbell

Expert names one SIPP mistake that can severely dent your pension pot

  • Holding excessive uninvested cash within personal pensions (SIPPs) and stocks and shares ISAs can significantly drag down long-term portfolio growth due to inflation and missed market rallies.
  • Financial advisers recommend keeping three to six months of emergency funds in easy-access savings outside investment platforms, whilst maintaining low cash balances of around two per cent inside long-term investment accounts.
  • Vanguard's James Norton highlights that £10,000 invested in global equities 20 years ago grew to £82,500 accounting for inflation, compared to reducing in purchasing power to just £4,100 if retained as cash.
  • Investment platform policies on uninvested cash vary substantially, with some providers offering competitive interest rates and others paying little to no interest, which can cost investors hundreds of pounds annually on larger balances.
  • Tax treatment differs across account types, with cash interest inside SIPPs and ISAs enjoying tax-free status, whereas uninvested cash in general investment accounts counts towards personal savings allowances and is subject to income tax .

IN FULL

This is how much cash you should really keep in your SIPP for investing

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