Savers and investors holding cash with Hargreaves Lansdown, the UK’s biggest direct to consumer platform, will see interest rates cut by at least 50% from next month.
From 10th August, investors who hold Cash on the Hargreaves Lansdown Vantage Platform will see interest rates cut from 0.1% to 0.05% on balances between £7,000 and £50,000. For balances in excess of £50,000 the interest rate will be cut from 0.25% to 0.1%.
Quoted on Citywire, Danny Cox of Hargreaves Lansdown defended the cuts, saying: “The Vantage cash accounts are immediate access trading accounts. Clients can withdraw or invest without charge at any time. Most current accounts pay no interest at all and many savings accounts on the high street have bonus rates where interest is lost on withdrawal.” (Source: Citywire)
The news will be greeted by dismay by Hargreaves Lansdown investors who hold significant amounts of Cash. According to interim results published in February 2013, 11% of the £28.5 billion held on the Vantage platform was in Cash, this huge amount of money will continue to attract an interest rate significantly below inflation.
However, experts have been quick to point out that whilst investors holding Cash will have to put up with a real terms loss, interest from their client’s Cash holdings contributes significantly to Hargreaves Lansdown’s turnover.
Whilst there are notable exceptions, many platforms, as well as SIPP (Self-Invested Personal Pension) providers retain some or all of the interest they receive on their client’s Cash account.
Cash options for SIPP investors
The interest rate cut from Hargreaves Lansdown is just another blow to Cash investors, particularly for those people planning for retirement using a SIPP.
Last month National Savings & Investments (NS&I) announced the interest rate on their Income Bonds, which were often used by SIPP Cash investors looking for instant access to their money, would be cut from 1.75% to 1.25% from 12th September. At the same time other banks and building societies have also reduced rates and even withdrawn accounts.
The main culprit is of course the Funding for Lending Scheme, which has given banks and building societies a cheap source of finance, allowing them to cut interest rates on deposit accounts.
At a time when the stock market is volatile and concern is mounting over a ‘bond bubble’, investors looking to Cash as a safe home will have to put up with interest rates below inflation for some time to come.
Looking for the best home for your SIPP Cash?
SIPP investors looking for the best interest rates on deposit accounts can find these by using our best buy table, which can be found by clicking here.