Updated: August 12, 2019

SIPP Investments

Did you know you can hold buy-to-let properties within your SIPP portfolio? Find out how this works and where to look for any guidance you may need.

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: August 12, 2019

SIPPs allow an array of investments – although some of these are taxed. Since SIPPs can be highly lucrative with a savvy and informed investor, but can deplete your pension savings if you’re misinformed, we strongly advise consulting with an expert on your SIPP investment platform (or on your SIPP strategies), if you’re uncertain.

This article discusses the following:

The experienced advisors we work will be happy to help you navigate your SIPP investments and guide you towards the best possible equities in your circumstances.

For an initial conversation with no obligation or fee, give us a call on 0808 189 0463 or make an enquiry here, and we’ll be in touch shortly.

For general information, read our SIPPs guide.

Approved investments

SIPPs allow you to invest in a variety of assets that you can control at your own volition. As long as they’re held in SIPPs, most equities are tax-free.

What’s permitted by HMRC?

Few SIPPs allow assets with probable HMRC violated-rules and risks. For that reason, few providers accept residential property. Otherwise, the spectrum of permitted SIPP investments is huge.

We cover just a snapshot of the topic here and advise that you speak to an expert for a more complete picture.

What can you hold in a SIPP?

Owners invest all kinds of investments in their SIPPs, from zoos to fire stations. In fact, the array of permitted SIPP investments is vast.

Here are the usual acquisitions:

  • Stocks and shares listed on a recognised exchange: Either UK or overseas. The growth of these shares depends on company performance and market conditions. If the company does well and market conditions are bullish, your yields can be attractive.
  • Government gilts and corporate bonds: Corporate bonds are loans made to a company to help it grow. Gilts are loans made to the government. Both business and government repay your respective loans with interest at a pre-specified date.
  • Insurance bonds or funds: Offered by insurance companies, these take the form of standard whole life, or term life, insurance policies.
  • Exchange-traded funds (ETFs):  ETFs are baskets of securities offered on any asset class from traditional investments to the less regular ones, like commodities or currencies.
  • Deposit accounts with banks and similar finance institutions.
  • National Savings products: like income bonds, premium bonds, and index-linked savings certificates.
  • Commercial property: Buildings include prisons, school-houses, care-homes, shops, malls, garages, hotels, restaurants, offices, warehouses and so forth. SIPPs are cautious when it comes to possible hazardous assets like petrol stations or possible risks, like land for developments.
  • Land:Agricultural land and land plots, like large parking lots.

Want to know more on any of these? Enquire here and we’ll be in touch.

Investment trusts

SIPPs also service two different types of investment trusts:

  1. Unit trusts and Open-Ended Investment Companies (OECs): You invest with others in UK or overseas stock markets. Investments are open-ended, which means how much you invest is up to you.
  2. Closed-ended investment trusts: You pool your money with other investors from shares that are found on the London Stock Exchange. Unlike OECs, these trusts are closed-ended, so you only buy shares from an existing investor.

Can I hold foreign currency in a SIPP?

Yes. Not all SIPPs allow you to hold foreign currency, such as US dollars, but there are some that do. If you’re planning to hold non-sterling capital, you will need to find a SIPP provider that understands the intricacies of this. Make an enquiry to speak with one of the specialist pensions advisors we work – they can help you find the best SIPPs for holding foriegn currency.

Is cash investment possible?

You can hold cash in your SIPP, but rates tend to be poor and lower than in regular savings accounts. Interest typically ranges 0.1%- 0.5%.  If you do store cash in your SIPP, check the rate.

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Can a SIPP buy a business?

Buying a business through your SIPP usually falls into the commercial property realm, rather than an outright purchase of a trading company. You can certainly purchase a commercial property through your SIPP.

In a self-administered SIPP, you manage the entire real estate transaction yourself. With a full SIPP, you transfer ownership to a trustee who buys the property for you through their own lenders, surveyors and prospectors.

SIPPs can also arrange mortgages to help you purchase property if you don’t have enough equity in the SIPP to purchase it otherwise (limited to a maximum of 50% of the asset value of your SIPP), while the mortgage is repaid by income received from rent levied on that property, which must still be paid at commercial rates.

Can I purchase a pub?

That, again, is certainly possible along with purchasing similar property types, like restaurants, motels and cafes. In fact, although residential property is disallowed, most SIPPs allow you to add a room for the pub manager.

Look for a SIPP that holds commercial property, or make an enquiry to speak with an expert advisor.

Can I buy a hotel?

Generally, you’ll want to look for a SIPP provider who accepts this type of property and who services your needs. Some commercial property SIPPs are self-administered. Others come with their own property management board that includes everything from prospectors, surveyors, and lenders. Each SIPP comes with its own provisions and costs. Questions? Make an enquiry for assistance.

What else can I put in a SIPP?

Other assets you can store in a SIPP include:

  • Gold: You can store gold bullion in your SIPP.
  • Derivatives: SIPPs accept all sorts of derivatives including UK listed warrants and US traded stock options. Few SIPP providers, on the other hand, accept contracts for difference (CFDs) (i.e. a contract between two parties speculating on the movement of an asset price).
  • Hedge funds: Namely, private highly risky investment funds, usually pooled.

Can I buy a classic car?

Vintage cars along with exotic products like fine wine, stamps, antiques and art are more of an uncertain situation. Since these items are heavily taxed, most SIPPs reject them. Make an enquiry to speak with an expert and find out what options you have in these circumstances.

Irregular investments you can hold

Aside from the regular assets listed above, unusual SIPP investments include the following:

  • Zoos
  • Airports
  • Recording studios
  • Nightclubs
  • Stadiums

Note: The more problematic the asset, the less likely SIPPs are to accept it. This is because they are responsible for your asset’s success. Complex or irregular assets denote uncertain income and tend to be more difficult to resell. Make an enquiry and one of the pensions experts we work with will help you determine whether a SIPP is the right option for your investments.

Popular investments

The most popular SIPP investments are open-ended funds, followed by equities, investment funds, cash and ETFs. Allocation size and investment preferences, typically, depending on investor experience and age group.

Popular SIPP acquisitions are large parking lots, especially in busy cities, that offer good returns. Many business owners also like to place the commercial buildings that they conduct business from in their SIPPs.

Low-risk investments

Naturally, as with all investments, cash, business bonds and gilts are the safest SIPP investments because they’re low-risk. At the same time of writing, the yield is low (0%-1% a year).

High-risk investments

Equity income funds are higher up on the risk ladder with attractive income if they succeed. Similarly, investments in initial public offerings (IPOs) or startups, real estate investment trusts (REITs) that invest in commercial or residential land, high yield bonds, land, and certainly, hedge funds are high-risk because of unpredictable market conditions.

Conversely, if you invest wisely and these SIPP investments succeed, your yields may be massive.

What are the best low-risk investments?

This depends largely on your retirement needs, your circumstances and the assets you have to your name. You should also seek specialist advice before proceeding.

Experts recommend a mix of low-risk and high-risk SIPP investments. These include balanced index funds, as well as real estate, commodities (like investments in oil, gold, wheat, or natural gas), and private equity. If you like risk, you may want to consider hedge funds, too. Each asset offers a potentially promising risk and returns benefits.

You’d also want to invest in equities like shares that may yield long-term growth.

What should I hesitate to invest in?

Although the Government allows you to store all types of assets in a SIPP, HMRC does tax the following:

  • Movable parts like furniture or personal belongings (with a market value of under £6,000)
  • Exotic products like vintage cars, fine wine, stamps, antiques and art
  • Residential property (including buy-to-let)

Levies on these items are huge – which explains why few SIPPs accept these assets.

What investment restrictions are in place?

SIPP providers vary in what they do and do not allow. Typically most don’t allow the following:

  • Residential property
  • Buy-to-let
  • Exotic items like pricey jewellery, vintage cars, high-priced art
  • Loans
  • Commodities – like shares in oil, natural gas, gold, silver, wheat, corn
  • Equities that have a life-span of less than 50 years
  • Intellectual property

Ask your SIPP provider on their preferences or make an enquiry to speak to a pensions expert for more information.

Investment limits

SIPP investment limits are capped at two amounts

  • Annual allowance: Namely the amount you can stock away each year. This is capped at £40,000 for people who earn up to £150,000 per annum. For people who earn more than that, your allowance amount reduces by £1 for every £2 of income. If you earn more than £210,000, your annual allowance SIPP deposit contribution is capped at £10,000.
    Note: Children and non-SIPP taxpayers are allowed annual maximum amounts of £2,880, to which the government adds its 20%, giving you £3,600.
  • Lifetime allowance: This is how much you can stock away over your lifetime. The maximum you can invest is £1.055m. Beyond that, you’re heavily taxed.

Investment rules

The most important  rules are the following :

  • You must be a UK resident (or planning to transfer another UK Pension into it once opened) and under 75 to set up a SIPP.
  • There is no minimum SIPP investment you can make.
  • You’re allowed drawdown from your SIPP once you’re 55. (See our SIPP drawdown guide for details).
  • Even then you’re allowed only 25% tax free. You pay tax on additional withdrawals.

Managing your own SIPP can be complex, so give us a call, or enquire here to be passed on to an expert pensions advisor who will be able to help.

Where can I get investment advice?

For advice on the best SIPP investment strategies and to find out what all of your options are make an enquiry here to speak to one of the pensions experts we work with.

Not only can they provide bespoke guidance on how to get the most out of a SIPP, but they can also review your investments to make sure the SIPP you’re signed up to is the right one for you.

What investment fees will I have to pay?

Each SIPP has its own fees.

Low-cost SIPPs usually charge the following:

  • Annual fee: either a fixed annual fee or a percentage of your portfolio.
  • Dealing fees: charges for buying and selling stocks or funds at either a fixed or percentage rate of trade. Some SIPP investment platforms charge rates for shares only.

Full SIPPs typically charge:

  • Setup fee: several hundred pounds.
  • Annual fee: several hundred pounds a year. SIPP platform fees can be fixed e.g. £80/year, or they can be percentage rates tiered to your SIPP investments, e.g. 0.30%.

If you opt for a SIPP that can contain Commercial Property, note that such SIPPs tend to mix fixed and time-based prices. This is because real estate management is diverse and unpredictable.

Additional costs may include an income drawdown fee when you retire and exit-transfer fees for transferring funds into or out of your SIPP.

Have questions? Enquire here and we’ll pass you to a pensions expert who can help.

How do I find the cheapest SIPP?

Firstly, there’s no such thing as “the cheapest SIPP” (and if there were, you’d want to be extremely sceptical). Generally, you get what you pay for, and some things – particularly quality service – may come at a price premium.

Generally, SIPPs come in a different array of shapes and sizes with varying price structures.

  • Low-cost: Most investors prefer these SIPPs, but their investments options are limited. Basically, they give you access to anything that can be easily traded on online platforms. At the very simplest, such SIPPs are limited to simple options, like unit trusts, investor groups and other pooled investments. You’ll want to look elsewhere for SIPPs that hold more complex assets, like commercial property and unlisted shares.
  • Full SIPPs: These offer the widest array of investment choices and include commercial property, as well as stock trading on worldwide stock exchanges, gold, derivatives and hedge funds. The priciest such SIPPs even allow-risky commodities, like residential and overseas property or exotic equities like cars and certain art – of course at an exorbitant price. Such SIPPs average £300-£700, depending on their services and structure. Some SIPPs, at the top end of the market, run to thousands of pounds.

Unsure what’s right for you? Make an enquiry for access to pensions experts.

What tax implications are there?

When it comes to tax relief, SIPPs can offer benefits for some investors.

  • Tax relief: Not only are assets in your SIPP not taxed, but the UK Government also adds an annual 20-45% tax relief to your pot, depending on your contribution rate. So say, you’re in the 20% tax bracket and you invest £4,000 in your SIPP, HMRC adds £1,000, giving you a total of £5,000.
  • Capital gains tax: Money gained from the sale of the SIPP commercial property is exempt from capital gains tax.
  • Income tax: Rental income from SIPP commercial property is exempt from income tax.
  • No inheritance tax: Commercial property in the SIPP is exempt from inheritance tax, with the owner’s death.

On the other hand, you do have to pay the following:

  • Tax on commercial property first transferred to the SIPP.
  • CGT/Corporation Tax – if the sale of your SIPP commercial property raises the value of your SIPP.
  • Tax on exotic items like vintage cars, fine art, and certain jewellery.
  • Stamp Duty – depending on the value of your property, you may be asked to pay this, too.

Questions on tax? Enquire here for reference to an expert pensions advisor who could help.

Speak to an expert pensions advisor

Call us today on 0808 189 0463 or make an enquiry here.

Then sit back and let us do all the hard work in finding the pensions advisor with the right expertise for your circumstances.

Ask A Quick Question

We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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Tony Stevens

Tony Stevens

Finance Expert

About the author

Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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