Any hope that the recent falls in interest rates on SIPP deposit accounts were coming to an end in October, have been well and truly dashed in November, with rate cuts and product withdrawals continuing apace.
The main reason behind the continuing rate cuts appears to still be the Funding for Lending Scheme (FLS), which is offering a cheaper source of finance to banks and building societies; although we are seeing more institutions confirm that their own funding position is strong, meaning they require less money from depositors.
No new SIPP deposit account providers have launched this month and only one new product has come on the market, namely Bank of Baroda’s 15 month fixed rate at 3.00% gross.
We can only hope that banks and building societies come back to the market with accounts as we move into 2013 and we are trying to encourage more institutions to launch new SIPP deposit accounts to increase both choice and competition.
November saw no accounts increasing their rates, which means, by our calculations, just one bank has increased their SIPP deposit rates during the past three months, and incidentally, rather swiftly cut them again.
The really bad news this month, is that the three banks holding out against the rate cutting trend, namely the State Bank of India, Bank of Baroda and Punjab National Bank, all of whom are protected by the Financial Services Compensation Scheme (FSCS), have started to reduce their rates.
Bank of Baroda has cut all its fixed rate accounts, from one to five years by between 0.15% and 0.25%.
State Bank of India has cut the interest paid on all fixed rate accounts, with the two year fixed rate falling the most with a massive reduction of 0.55%, taking the rate to 2.90%; the four and five year fixed rate accounts have been withdrawn completely.
Punjab National Bank has followed suit and cut rates with effect from 1st December by up to 0.50%.
On the whole rates notice accounts have held up well, with the most notable rate reductions coming on popular longer term fixed rates.
Although the Buckinghamshire Building Society has cut the interest rate on their instant access SIPP Plus account from 2.10%, for balances of £25,000 and above, to just 1.25% and in a shock move, Scottish Widows Bank has withdrawn completely its popular instant access account, which had been unchanged for over three years.
It is also noticeable that the rates offered by the offshore institutions, who are not covered by the FSCS and don’t have access to the FLS, have held up well and are starting to look attractive. Although savers need to be aware that they deposits will not be covered by the FSCS.
On the back of the Scottish Widows withdrawal from the instant access account market, the Buckinghamshire Building Society has also withdrawn their three month, and one and two year fixed rates.
Cater Allen has significantly cut their three month fixed rate from 1.70% to just 0.62%, their longer term fixed rates have been cut too, with the two year rate falling from 3.20% to 2.75%, and three years from 3.40% to 3%.
Investec has significantly reduced the rate on their popular Pension & Trust Reserve account from 2.25% to 1.35%. In addition Investec has also reduced its six month fixed rate from 2.20% to 1.50%, whilst its one year rate has dropped by 1% to 2%, 18 months from 2.90% to 2.10%, two years from 3.10% to 2.20%, and longer term fixed rates have also been cut significantly.
Arbuthnot Latham has cut its six month fixed rate by 0.40% to 1.35%
Close Brothers has shaved rates slightly, but in the main have has held rates better than most of its competitors.
RBS has cut both their one year fixed rates by 0.25% and Julian Hodge Bank has trimmed all rates by as much as 0.50% on their four year fixed rate.
Lastly the Bath Building Society has withdrawn its notice accounts until further notice.
Any hopes that SIPP deposit account interest rates would rise again before Christmas were probably dealt one final blow in November, when Bank of Baroda, State Bank of India and Punjab National Bank all cut their rates and some significant other moves were made by the likes of Scottish Widows Bank.
Longer term fixed rates look particularly uncompetitive at the moment, with only one account, from the Bank of Baroda, paying above 4%.
We’ll be monitoring the market closely over the next month to find any other banks or building societies who decide to increase rates, and much like last month, our fingers will remain crossed, although more in hope than expectation.
We welcome your feedback; if there is another bank or building society you know who offers deposit accounts for SIPPs, which we don’t include, please email us to let us know. We can be reached by emailing firstname.lastname@example.org or by calling 0115 933 8433 and asking for Phil Bray.
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