Self-Invested Personal Pension (SIPP) Investment Options: What You Can Hold

The defining feature of a Self-Invested Personal Pension (SIPP) is the breadth of its investment options. Unlike a standard personal pension or a workplace default fund, a SIPP allows the member to choose from a wide range of investment types, giving them direct control over how their retirement savings are invested. For UK expats who may have specific investment objectives, international market exposure, or the desire to include alternative assets, understanding what a SIPP can and cannot hold is fundamental.

However, the SIPP's investment flexibility comes with important restrictions. HMRC sets clear rules on which assets are "permitted" and which are "taxable property." Holding prohibited investments or "taxable property" in a SIPP triggers punitive tax charges — both on the scheme administrator and the member.

This guide explains the full range of permitted SIPP investments, the restrictions on taxable property (including residential property, which is one of the most common misunderstandings), and practical considerations for expat SIPP investors.

Nothing in this guide constitutes personalised investment or financial advice. Investment values can fall as well as rise, and you may receive back less than you invested. Seek regulated advice before making SIPP investment decisions.

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What Is a SIPP?

A SIPP is a personal pension that is registered with HMRC and regulated by the Financial Conduct Authority (FCA). Unlike a standard personal pension (where the provider selects from a limited range of internal funds), a SIPP allows the member to direct investment into a much broader universe of assets.

SIPPs come in two broad types:

Platform SIPPs (sometimes called "lite" SIPPs): These are typically offered by online investment platforms. They allow investment in stocks, shares, funds, ETFs, and bonds listed on recognised exchanges, but do not typically support commercial property, loans, or unlisted investments.

Full SIPPs: Offered by specialist SIPP providers, full SIPPs support the broadest range of investments including commercial property, unlisted shares, structured notes, and in some cases alternative assets.

The investment universe available to you depends on which type of SIPP you hold and which specific provider you use. Not every SIPP provider offers every permitted asset class.

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Permitted Investments: What a SIPP Can Hold

1. Stocks and shares (listed equities)

SIPPs can hold shares in companies listed on a recognised stock exchange. This includes:

• UK companies listed on the London Stock Exchange (LSE), AIM, and AQUIS.
• International companies listed on recognised overseas exchanges — NYSE, NASDAQ, Euronext, Deutsche Börse, Tokyo Stock Exchange, Hong Kong Stock Exchange, and many others.
• Shares in overseas-listed investment companies, REITs, and holding companies.

For expat SIPP investors, the ability to invest in overseas-listed equities through a UK SIPP provides diversification across geographies without needing to hold multiple offshore investment accounts.

2. Investment funds (unit trusts, OEICs, and authorised funds)

SIPPs can hold:

• UK-authorised unit trusts and OEICs (open-ended investment companies).
• Investment trusts (closed-ended investment companies listed on the LSE or other recognised exchanges).
• Exchange-traded funds (ETFs), including those listed internationally.

UCITS funds (Undertakings for the Collective Investment of Transferable Securities) authorised in the EEA and marketed in the UK are generally permissible. Non-UCITS funds — particularly offshore or lightly regulated funds — may or may not be permitted depending on whether the SIPP provider accepts them and whether they constitute "taxable property."

3. Fixed income (bonds and gilts)

SIPPs can hold:

• UK government bonds (gilts).
• Corporate bonds listed on recognised exchanges.
• Treasury bills.
• Fixed income funds (bond funds, gilt funds).
• Structured notes that are listed on a recognised exchange.

For expats managing drawdown from a SIPP, fixed income allocations can provide predictable income streams — dividends and coupon payments — as part of a natural income drawdown strategy.

4. Commercial property

Full SIPPs can hold commercial property directly. This includes:

• Office buildings.
• Retail premises.
• Industrial units and warehouses.
• Agricultural land (though with specific considerations).
• Mixed-use properties where commercial use predominates.

Commercial property can be owned directly by the SIPP or through a property syndicate (where multiple SIPPs jointly own a property). The SIPP pays for the property; rental income is received by the SIPP free of income tax; capital gains on sale are free of capital gains tax within the SIPP.

For expat business owners, the ability to purchase business premises through a SIPP — leasing them back to the business at commercial rents — is a powerful tax planning strategy. The rental income builds the pension fund; the business obtains a deduction for the rent.

Important restrictions on commercial property in a SIPP:

• The property must be genuinely commercial in use.
• It cannot be used for personal purposes by the member, connected parties, or anyone providing them with a service.
• Transactions must be at arm's length, commercial terms.
• Borrowing to fund the purchase is permitted up to 50% of the SIPP's net asset value.

5. Cash and cash equivalents

SIPPs can hold cash in deposit accounts and money market instruments. Many SIPP providers hold contributions in a default cash account pending investment. Ongoing cash management (choosing the deposit rate) may require active instruction to the provider.

6. Currencies

Some SIPP platforms allow the holding of foreign currency deposits within the SIPP. This can be useful for expats who wish to build a currency buffer ahead of drawdown payments or who hold foreign currency investments.

7. Derivatives (via certain structures)

Listed derivatives — options and futures on recognised exchanges — may be permissible in some full SIPPs, subject to the provider's own rules and the underlying asset being permissible. Unlisted or over-the-counter derivatives are generally not permitted.

8. Private equity and unlisted shares

Full SIPPs can hold unquoted (unlisted) shares in private companies, subject to significant restrictions:

• The shares must not constitute "taxable property" (see below).
• The company must not be a "connected" company in certain ways (HMRC defines specific connection tests).
• The SIPP's holding in any single company may be limited by the provider's rules.

Holding unlisted shares in a family company through a SIPP is one of the areas where HMRC's rules are most easily inadvertently breached. Specialist advice and a full SIPP provider experienced in these transactions are essential.

9. Structured products and alternative investments

Some full SIPPs accept:

• Structured capital-protected notes (where listed on a recognised exchange).
• Traded endowment policies.
• Gold bullion coins and bars (with specific conditions).
• Hedge funds (where the underlying structure does not constitute taxable property).

The permissibility of alternative investments varies significantly by SIPP provider. Not all providers accept all alternative assets.

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Taxable Property: What a SIPP Cannot Hold

HMRC's "taxable property" rules identify assets that, if held within a registered pension scheme, attract an "unauthorised member payments" charge. The key categories:

Residential property

This is the most important restriction, and one of the most misunderstood by SIPP members.

A SIPP cannot directly hold residential property, including:

• A house or flat used or intended for use as a dwelling.
• A holiday property (even if rented out commercially for most of the year).
• A property used as a personal residence for the member, their family, or any connected person.
• Residential flats even if in a mixed commercial/residential building where the SIPP holds the residential element.

If a SIPP holds residential property, the rules treat the property as an "unauthorised member payment." The tax charge is:

• 40% unauthorised payment charge on the individual member.
• 15% scheme sanction charge on the SIPP provider.
• These combine to a total tax charge that can exceed 55% of the property value — effectively destroying the tax advantages.

This is one of the most common misunderstandings among SIPP investors (and some offshore advisers). No amount of commercial intent or rental income makes residential property permissible in a SIPP.

Indirect exposure to residential property through a listed fund (a residential REIT listed on a recognised exchange) is generally permissible — the SIPP holds shares in the fund, not the underlying residential property.

Tangible moveable property

SIPP cannot hold:

• Personal chattels (artwork, antiques, jewellery, classic cars, wine).
• Items that could be available for personal use or enjoyment of the member.

Gold bullion coins are a partial exception — HMRC allows certain coins in a SIPP (UK legal tender gold coins), provided they are stored by a custodian and are not available for personal use. The rules are specific; take advice before holding gold in a SIPP.

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Borrowing Within a SIPP

A SIPP can borrow to fund investments, subject to rules:

• Maximum borrowing: 50% of the net asset value of the SIPP.
• The borrowing must be from an arm's length lender on commercial terms.
• Borrowing is most commonly used to part-fund commercial property purchases.

For expat SIPP holders considering SIPP property investment, understanding the borrowing limits is important for financial planning.

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SIPP Investment Considerations for Expats

Suitability of investments for drawdown

As an expat approaching or in drawdown, the SIPP's investment mix should generate sufficient liquidity for withdrawals without forced selling at inopportune times. Consider:

• Holding some cash or short-duration bonds for near-term withdrawals.
• Maintaining a long-term equity allocation for growth.
• Avoiding illiquid assets (unlisted shares, commercial property) for more than a minority of the portfolio if drawdown is imminent.

Currency alignment

If you are spending in a foreign currency, consider whether your SIPP holds sufficient foreign currency or international assets to reduce currency conversion costs and risk on drawdown.

Accessing investments via the SIPP platform

Not all SIPP platforms allow investment in all markets from an overseas account. Some platforms require a UK address for account management (though this is increasingly changing). Confirm that your chosen SIPP platform can be fully managed from your country of residence, including executing trades and receiving drawdown payments.

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How Global Investments Can Help

Global Investments helps UK expats build investment strategies within their SIPPs that are appropriate for their retirement horizon, risk profile, currency needs, and drawdown objectives. We can advise on suitable asset allocations for expat SIPP investors and help ensure that the investments held are fully compliant with HMRC's permitted investment rules.

We also assist clients transitioning from accumulation to drawdown within their SIPP, restructuring the investment mix to deliver sustainable income whilst managing risk. Contact us for a SIPP investment review tailored to your circumstances.

Investment values can fall as well as rise. Past performance is not a guide to future returns. Tax rules on permitted SIPP investments may change. This guide is for information only and does not constitute regulated investment advice.