UK - High numbers of cash accounts available to pension fund managers are offering poor returns and are applying lengthy notice periods, a new report by Scottish Widows Investment Partnership (SWIP) has revealed. SWIP's research claims that the average return on cash balances of more than £1 million, aimed at pension fund managers, is 3.68% Gross AER.
In addition to poor returns offered by some cash accounts to this sector, many also restrict access to funds, with around 40% of accounts having restrictions of between seven days and six months.
SWIP is now urging pension fund managers to review their cash holdings and consider transferring more into liquidity funds, which offer a similar low risk but higher return alternative to short-term money market deposits. Donald Aiken (pictured), head of cash services at SWIP said that flexible and competitive institutional money market funds were the ideal solution for residual cash management.
Aiken explained: “Many accounts aimed at pension fund managers offer mediocre returns and restrict access to funds. We believe that the combination of attractive returns, capital preservation and penalty free access that liquidity funds offer will prove popular with pension fund managers.”
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