Financial advisers often talk about the wide range of investments retirement savers can hold in a SIPP without explaining just what these investments are.
So, here’s a list of allowable pension investments from HM Revenue and Customs.
These are investments that can be held in a SIPP without triggering an ‘unauthorised asset’ penalty.
Holding moveable assets in a pension automatically triggers a penalty. Moveable assets include fine are, wine, residential property, cars, helicopters and yachts.
The exception is a small amount of gold – which is explained below.
Stocks and shares:
- Securities but not derivatives listed on the London Stock Exchange, London Alternative Investment Market (AIM) or any other overseas exchange recognised by HMRC
- UK Treasury bills
- Unlisted securities, provided the parties involved are not connected to the investor
- Depositary interests listed on the London Stock Exchange, London Alternative Investment Market (AIM) or any other overseas exchange recognised by HMRC
- Any futures, options, warrants or other derivatives where the contract liability is less than the amount invested in the contract
Collective investment schemes
- Exchange traded funds and commodities, tax exempt unauthroised unit trusts, OIECS
- Close-ended collectives, investment companies, trusts and REITS listed on the London Stock Exchange, London Alternative Investment Market (AIM) or any other overseas exchange recognised by HMRC
- Limited liability partnerships
- Only if the underlying investment is an European Economic Area (EEA) deposit account or another asset allowed as an authorised asset
- Any National Savings & Investment product that a corporate trustee is cleared to hold
- Most accounts with EEA authorised deposit takers
- Commercial property only
- Loans to connected parties, limited companies and limited liability partnerships
- Investment grade gold as a bar or wafer that is professionally stored with a purity of no less than 995/1000
HMRC says tax rules don’t restrict what a scheme can invest in but if certain conditions aren’t met there may be tax charges on the investment.
However, the income and gains from investments in most pensions are not taxed.
Full details of HMRC’s guidance on pension investments are outlined in the Pensions Tax Manual, which offers technical advice to HMRC staff.