SIPP Allowable Investments: What You Can and Cannot Hold

The Self-Invested Personal Pension (SIPP) is the most flexible UK pension wrapper available to individuals. Unlike group personal pensions or workplace master trusts — which restrict you to a curated fund menu — a full SIPP can hold a wide range of assets, potentially including commercial property, listed shares worldwide, investment trusts, and more.

But flexibility has boundaries. HMRC's rules on SIPP-permitted investments are clearly defined, and the penalty for holding a prohibited asset within a SIPP is severe. This guide sets out exactly what is and is not allowed, explores the grey areas, and explains how SIPP provider policies can restrict options further.

The Core Permitted Investment Classes

HMRC's registered pension scheme rules permit the following investment types within a SIPP:

Cash and cash equivalents: Current accounts, savings accounts, and money market funds held within the SIPP bank account. Cash can be held at any level and is the default while awaiting investment decisions. Interest earned within the SIPP is free of tax.

Listed equities: Shares listed on any HMRC-recognised stock exchange. This includes the London Stock Exchange (main market and AIM), NYSE, NASDAQ, Euronext, and other major global exchanges. There is no restriction on the geographic market — a SIPP can hold shares in US, European, Asian, or emerging market companies provided the exchange is recognised.

Investment trusts: Listed investment trusts are treated as quoted shares and are fully permitted. These include commercial property REITs (Real Estate Investment Trusts), infrastructure investment trusts, private equity trusts, and debt investment trusts — all are permitted as long as the trust itself is listed.

Unit trusts and OEICs: UK-authorised funds — unit trusts and open-ended investment companies (OEICs) — are fully permitted. The SIPP can hold funds from virtually any mainstream fund management company.

ETFs (Exchange-Traded Funds): Permitted, whether equity, bond, commodity, or alternative ETFs. The broad availability of global ETFs on UK platforms makes this one of the most flexible investment options within a SIPP.

UK gilts and government bonds: Fully permitted. Gilts and overseas government bonds issued by recognised states are allowable SIPP investments.

Corporate bonds: Sterling and foreign currency corporate bonds issued on recognised exchanges are permitted. High yield, investment grade, convertible — all are allowable.

Commercial property: A SIPP can purchase freehold or leasehold commercial property — offices, warehouses, industrial units, retail premises, agricultural land, and mixed-use commercial property. This is subject to specific rules (see below).

Unquoted company shares: Technically permitted, though in practice most SIPP providers decline. See the grey areas section.

Structured products: Some structured deposits and capital-at-risk products are permitted if they meet HMRC's criteria for authorised investments. Provider acceptance varies.

The Prohibited Investments

Certain asset classes are explicitly prohibited from being held in a SIPP. Holding them triggers an "unauthorised payment" charge from HMRC — a punitive tax on the value of the prohibited asset.

UK residential property: This is the most important prohibition. A SIPP cannot hold:

• A buy-to-let residential property
• A flat or house that could be used as a private dwelling
• A holiday home or short-let property
• Residential property via a vehicle such as an SPV or limited company (the "look-through" rules apply)

The prohibition applies regardless of how the property is structured. Schemes that claimed to allow residential property via creative structures have uniformly failed HMRC challenges.

Tangible moveable property: HMRC prohibits pension funds from holding physical assets that can be used or enjoyed personally. This includes:

• Works of art and antiques
• Fine wine and spirits
• Classic or luxury motor vehicles
• Jewellery and precious stones
• Rare books and manuscripts
• Coins and memorabilia

These are sometimes called "wasting assets" or "personal chattels." The prohibition exists because these assets could confer a personal benefit on the pension member or their associates — a private benefit from a tax-privileged vehicle.

Assets that confer a personal benefit: Broadly, any investment where the member or a connected person derives personal enjoyment or use is prohibited. A holiday home "owned by the SIPP but used by the family" is the paradigm case.

The Grey Areas: Investments That May or May Not Be Permitted

Several investment types sit in an ambiguous space where the legal rules technically permit them but practical, commercial, or provider considerations frequently prevent them.

Unquoted company shares: A SIPP is technically permitted to hold shares in a private company not listed on a recognised exchange. However:

• Valuation is difficult — unlisted shares require annual independent valuations
• Liquidity is absent — the SIPP cannot easily sell the shares if cash is needed for drawdown
• Connected party rules apply — if the company is connected to the member (e.g., the member's own trading business), the rules on prohibited loans and employer-related investment apply
• Most SIPP providers refuse unquoted shares for these practical reasons; specialist SIPP providers (typically full SIPP platforms) may accept them with appropriate documentation

AIM shares: AIM (Alternative Investment Market) shares are listed on a recognised exchange and are therefore allowable. However, AIM stocks are illiquid compared to main market stocks, and some SIPP providers restrict AIM holdings or require minimum investment minimums. Some AIM shares qualify for Business Relief (formerly Business Property Relief) from inheritance tax when held directly, though from 6 April 2026 qualifying AIM and other unlisted shares attract only 50% relief (a 20% effective IHT rate) rather than the former 100%. Note that this Business Relief is a feature of holding such shares directly in your estate — it is not an additional benefit of holding them inside a SIPP, where the pension wrapper governs the inheritance-tax treatment. Specialist advice is essential.

Peer-to-peer loans: Some full SIPP providers accept P2P loan investments (loans to individuals or businesses facilitated by P2P platforms). This is a genuinely ambiguous area: the rules do not explicitly prohibit P2P lending, but many providers consider the lack of a recognised exchange listing to create issues. Treat this as provider-dependent and verify before investing.

Cryptocurrency: Direct holdings of Bitcoin, Ethereum, and other cryptocurrencies are not explicitly prohibited by HMRC statute, but virtually all SIPP providers decline to hold them. The reasons are: absence of a regulated exchange listing, valuation methodology concerns, custody complications, and HMRC's own guidance treating crypto as a "novel" investment where the SIPP rules are unclear. A small number of specialist SIPP custodians are beginning to accept crypto holdings. This remains an evolving area — as of 2026, crypto within a SIPP is possible in limited circumstances but involves significant provider selection limitations.

Overseas property: Foreign commercial property is permitted in the same way as UK commercial property, subject to the proviso that it is not residential. A warehouse in Germany, an office in France, or an industrial unit in Ireland could in principle be held in a SIPP. Practical challenges include: overseas title structures may not be recognised by UK SIPP trustees, currency risk, foreign property management, and provider willingness. Very few SIPP providers accept overseas commercial property.

Commercial Property: The Detailed Rules

Commercial property is the most commonly used "alternative asset" in full SIPPs, particularly for business owners who want to own their own commercial premises within a pension fund.

What is permitted:

• Freehold or leasehold commercial property
• Offices, warehouses, retail units, industrial premises, agricultural land, hotels (under certain structures)
• Mixed-use properties where the commercial element predominates

The arm's length requirement: If the commercial property is connected to the member — for example, the member's own business leases the property from the SIPP — all dealings must be at strictly arm's length:

• The lease must be at market rent, reviewed periodically by an independent surveyor
• Rent must be paid on commercial terms and on time
• Documentation must demonstrate the commercial nature of the arrangement

Mortgage within a SIPP: A SIPP can borrow to purchase commercial property. Borrowing is limited to 50% of the SIPP's net asset value. The loan must be from a commercial lender at arm's length — not from the member or a connected party.

Prohibited use: The commercial property cannot be used by the member or their family for personal purposes — not as a holiday home, not as occasional private accommodation, not as a personal office.

The Connected Party Restrictions

A theme across several grey areas is the "connected party" restriction. HMRC is alert to arrangements where pension assets are used to benefit the member personally rather than providing genuine retirement savings.

Connected parties include the member's:

• Spouse or civil partner
• Children and their spouses
• Parents
• Business partners
• Companies the member controls

Transactions between the SIPP and connected parties at non-arm's length prices — or transactions that confer a personal benefit — are treated as unauthorised payments, triggering the 40–55% penalty tax charges.

The Penalty for Prohibited Investments

If a SIPP holds a prohibited investment, HMRC treats the acquisition as an "unauthorised payment" from the pension scheme. The consequences:

• Unauthorised payments charge: 40% of the unauthorised payment on the member
• Surcharge: an additional 15% if the unauthorised payments exceed 25% of the fund
• Scheme sanction charge: 15–40% of the unauthorized payment payable by the scheme administrator

Total effective tax rates can reach 55–70% of the prohibited asset value. The scheme administrator (the SIPP provider) is also liable and will typically take steps to remove the prohibited investment.

These charges are not waivable on hardship or ignorance grounds. The investment must not have been made in the first place.

SIPP Provider Variation: Full SIPP vs Platform SIPP

Not all SIPPs offer equal investment flexibility:

Full SIPPs (offered by specialist SIPP providers): Accept commercial property, unquoted shares, esoteric assets, overseas securities on all recognised exchanges. Higher administration fees — typically £500–2,000 per year or more depending on complexity. Suitable for investors with specific alternative asset requirements.

Platform SIPPs (offered by investment platforms): Restrict investments to the platform's fund and stock universe. Cannot hold commercial property or unquoted assets. Lower fees — often 0.15–0.45% per year. Suitable for investors using standard listed assets only.

Insurance company SIPPs: Often restrict investments to the insurer's own fund range, plus some external funds via their platform. Similar limitations to platform SIPPs.

If your investment strategy requires commercial property or alternative assets, check the provider's investment scope before setting up the SIPP. Transferring a SIPP with specialist assets is complex and may not be possible with all receiving providers.

How Global Investments Can Help

Selecting the right SIPP structure — and populating it with the right investments — requires a clear view of both your financial objectives and the regulatory framework. For business owners considering pension-owned commercial property, internationally mobile investors seeking global exposure, or those with complex alternative asset requirements, our advisers provide structured guidance on SIPP design, provider selection, and compliant investment strategy. We ensure your SIPP investments remain within HMRC's rules while making the most of the flexibility the structure provides. Contact us to discuss your SIPP investment planning.