Penny asks:

How can I hold savings accounts within my pension fund? I have a lump sum that I want to turn into an annuity in a few years' time and I want to move it into a pension fund so that I get the benefits of tax relief. My problem is that I can't see how to get access to normal deposit-based savings products or index-linked savings certificates within a pensions wrapper.

I don't want equities or even corporate bonds because I don't want the volatility risk. I just want (as well as index-linked savings certificates) the normal sort of deposit fund that you can get for a cash ISA at a reasonable 'best buy' interest rate with no additional charges for holding it within a pension. I'd also like the ability to spread my money between several banks so that I don't have more than £50,000 in each. All I can find are SIPPS (self invested personal pensions) with - at best - one cash fund with a pretty grim interest rate and no protection above £50,000. Can you help?

I agree with your view of keeping your pension investments secure and risk free if you are planning on purchasing an annuity in the short term. Unfortunately, straightforward cash deposit funds are not available within the personal pension or stakeholder pension plans. You will find deposit funds, but these are generally a mix of fixed interest securities and institutional fixed interest deposits and, although low risk, their value can fluctuate.

A self invested personal pension (SIPP), which allows you to select where you want to invest your money, is the only way you can access a traditional cash deposit accounts. You have to bear in mind that it is the SIPP that it is the beneficial owner of the assets held within your pension fund (not you) and as a result, it is not seen by many banks and building societies as the same as an individual opening a savings account.

The problem is finding a competitive savings account that will accept a SIPP opening account. This is simply a ringing around exercise that can be pretty frustrating. If you decide to opt for a SIPP, the SIPP provider should have links with a number of banks or building societies that they know will accept SIPP accounts and you would be able to access fixed rate deposits too. However, you shouldn’t expect to get the most competitive rates. Also bear in mind that the £50,000 limit on the depositors’ compensation scheme may not apply to your SIPP deposit - as the SIPP is the owner of the asset, the £50,000 limit applies to the SIPP provider as a whole and not to you. So if they have multiple accounts with the same bank that £50,000 will be split between them all.

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