Low rates on cash deposits in Self-Invested Personal Pensions (SIPPs) are damaging returns for clients, say Independent Financial Advisers (IFAs) in a study by Prudential.

Research amongst advisers shows that more than half (56 per cent) of specialist pensions IFAs are concerned by the low rates of return on cash in SIPPs and Small Self Administered Schemes (SSAS).

Recent research by Prudential shows that 51 per cent of people have cash as their greatest exposure, and 67 per cent are looking at alternatives with higher returns. Only a quarter are committed to their cash position, however.

Advisers and their clients must consider with-profits funds as alternatives to cash, says Prudential, and 82 per cent of advisers value long-term performance as the key attribute when recommending investment products to clients.

"Clients are understandably concerned about the potential effects of volatility and that has lead to increased caution about SIPP and SSAS investments," commented Vince Smith-Hughes, head of business development for pensions at Prudential. "However, the rates on cash deposits are so low that the cost of avoiding volatility can outweigh the benefits. Clients are losing out on the potential gains of an investment like with-profits by keeping high levels of cash on deposit."

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