What investment options are available within a SIPP?
Stocks and shares
The holding of publicly quoted shares, gilts, debentures and loan stock is relatively simple and straightforward. Within a SIPP, these will either be held via the SIPP provider’s platform or through a third-party stock broking or discretionary management account. A SIPP pension holder can also acquire shares in a private or unquoted company although this may incur tax charges.
Commercial property
Commercial property can be held within self invested personal pensions. Commercial property does not just include the normal bricks and mortar offices, warehouses, retail units and factories but also covers land (including farmland), woodlands, forestry and the slightly more unusual, such as a hall of residence for students.
Residential property
Generally it is not possible for residential property to be held in a SIPP because of the penal tax charges. There are a small number of specific exceptions for job-related accommodation.
Bank accounts
SIPPs allow cash to be held in third-party bank accounts. If you are looking at bank account options, it is important to ensure the account permits investment into it by the trustees of a pension scheme, rather than only personal account holders.
Loans
Even though a SIPP cannot make a loan to a connected company or individual, it is possible to make a loan to an unconnected third-party individual, company or partnership. You need to bear in mind that the loan should be a genuine investment of the SIPP and be prudent, secure, and on a commercial basis.
Borrowing
It is now possible for a SIPP to borrow funds for any investment purpose. The only HMRC restriction is that a maximum of 50% of the net fund value can be borrowed. The borrowing can be from either a normal commercial lender, from the member themselves, or a connected party. If the borrowing is from the member or a connected party then, in order to comply with HMRC regulations, it must be on commercial terms.
Tangible moveable property
Tangible moveable property is things you can touch and move. Examples of these are fine art, antiques, jewellery, fine wines, boats, classic and vintage cars, stamp collections, and rare books. All these attract a substantial tax charge if held within a Self Invested Personal Pension.
However, HMRC has stated that investment grade gold bullion in the form of a bar or wafer; of a weight accept by the bullion markets; can be held by the SIPP with no tax consequences.
