Self Invested Personal Pensions (SIPP's)
SIPP's are a type of Personal Pension Plan. The HMRC rules allow for a greater range of investments to be held within a SIPP than Personal Pension Plans, notably equities and property. Rules for contributions, benefit withdrawal etc are the same as for other personal pension schemes.
Investors may make choices about what assets are bought, leased or sold, and decide when those assets are acquired or disposed of, subject to the agreement of the SIPP trustees (usually the SIPP provider).
All assets are permitted by HMRC, however some will be subject to tax charges. The assets not subject to a tax charge include:
- Stocks and shares listed on a recognised exchange
- Futures and options traded on recognised futures exchange
- Authorised unit trusts and OEIC and other UCITS funds
- Unauthorised unit trusts that do not invest in residential property
- Unlisted Shares
- Investment trusts subject to FCA regulation
- Unitised insurance funds from EU insurers and IPAs
- Deposits and deposit interests
- Commercial property (inc. hotel rooms)
- Ground rents (as long as they do not contain any element of residential property)
- Traded endowments policies
- Derivatives products such as a Contract for difference (CFD)
Commercial Property Purchase
One of the most common uses for a SIPP is for the purchase of a commerical property. The property can then be let, usually to the members own firm, providing investment income and, over the longer term, capital growth. SIPP's can borrow money (subject to legislative limits) to help faciltate the property purchase. It is also possible to group together a series of SIPP's with a joint investment strategy, Co-Directors for example where the funds can be combined to make the purchase possible or remove the requirement for borrowing.