Proactive Investors - Interactive Investor (ii), the investment platform owned by Abrdn PLC (LON:ABDN), said it will increase the amount of interest paid on cash balances held in customers' ISAs, trading accounts and SIPPs.
It follows rival AJ Bell PLC (LON:AJBA)'s similar move earlier this month.
Hargreaves Lansdown (LON:HRGV), the UK's largest platform, has not yet moved to hike interest on cash balances since the Financial Conduct Authority (FCA) warned platforms over the practice of charging to hold people’s cash and then accruing interest on it, so-called 'double dipping'.
The UK’s second-largest DIY investor platform said from the start of February, the first £10,000 of cash balances in trading accounts and ISAs will receive 2% gross interest, up from 1.75%, and then up to £100,000 will receive 2.75% and amounts between £100,000 to £1,000,000 will receive 3.75% gross.
For SIPPs, interest on the first £10,000 of cash balances will increase from 2.75% to 3.00% gross, rising to 3.75% for up to £100,000, while the next segment remains unchanged at 4.00%.
For SIPP and ISA balances above £1,000,000 a new tier is to be introduced that will pay 4.75% gross on sterling balances and 5% on US dollar balances.
For euro balances held in trading accounts, 2% will be the rate for all balances, up from 1.75%, while in SIPPs, the interest paid on euro cash will be 3%, up from 2.75%.
“We are an investment platform, our customers come to us to invest, and there are many sound reasons why they may choose to maintain cash balances with us in the short term," said Richard Wilson, ii's chief executive.
“We are fully committed to transparency on rates and in our customer communications," he said, noting that the platform offers a range of interest-paying investment options, including an array of cash alternatives such as fixed income, money market, and a cash deposit services.