When considering how much cash to keep in your Self-Invested Personal Pension (SIPP) or stocks and shares Individual Savings Account (ISA), it’s important to understand how your investment provider manages uninvested funds. These accounts allow individuals to invest directly in stocks, funds, or other assets, but many investors hold cash within them for various reasons—whether waiting for the right investment opportunity, holding dividends, or preparing for a future purchase like a home. However, the way providers handle cash can vary significantly, and understanding these differences is key to maximizing returns. Financial experts suggest that while cash has a role in any investment strategy, it should not dominate long-term portfolios. James Norton, head of retirement and investments at Vanguard, recommends keeping three to six months of living expenses in cash for emergencies. If you have a short-term financial goal, like buying a house, cash can be appropriate—but it’s better to hold it outside of your investment account. Matt Lewis, a chartered financial planner at EQ Investors, adds that if you plan to use the money within three years, keeping it in a competitive interest-bearing account can be sensible. However, holding too much cash for long periods can reduce growth potential, especially since cash typically earns less than investments and may not keep up with inflation. For long-term investing, cash should generally be kept to a minimum—often around 2% of the portfolio—assuming the rest is invested with a medium or long-term goal in mind. Lewis suggests maintaining a personal cash reserve outside of investment accounts to provide peace of mind, allowing the rest of your money to grow without being held back. Norton notes that over time, cash can significantly underperform compared to investing. For example, £10,000 invested in global stocks 20 years ago would be worth £82,500 today, while the same amount left in cash would be worth only £4,100 due to inflation. This highlights the importance of avoiding excessive cash holdings that may slow down growth. Not all investment platforms treat uninvested cash the same. Some, like AJ Bell, Hargreaves Lansdown, and Vanguard, offer interest on cash held in ISAs and SIPPs, but the rates and conditions can vary. Some providers pass on most of the interest they receive from banks, while others keep a portion. Interest rates may be tiered, capped, or require specific actions to activate. In contrast, some platforms offer little or no interest on default cash balances. It’s crucial to check whether your provider pays interest, at what rate, and under what conditions, as fees and taxes can affect the effective return. For example, interest within a SIPP is currently tax-free, while in a stocks and shares ISA it will be taxed next year. In taxable accounts, interest counts toward your personal savings allowance, beyond which it becomes taxable. Understanding these details can help investors make more informed decisions about how much cash to keep in their accounts.