What Readers Need to Know

  • SIPP Investment rules are set by HMRC, with conduct rules added by the FCA for SIPP operators and advisers.
  • Most mainstream investments — funds, shares, ETFs, investment trusts — are allowed in a SIPP.
  • Direct holdings of residential property and many personal-use Assets are restricted under the taxable property regime.
  • Buying prohibited assets through a SIPP can trigger substantial tax charges, often more than 50% of the amount involved.
  • The FCA has repeatedly warned about high-risk, Illiquid investments used inside SIPP wrappers and the link to pension scams.

Introduction

SIPP — the Self-Invested Personal Pension — has become a familiar feature of the UK retirement landscape because it offers more investment choice than a typical workplace pension. But 'more choice' does not mean unlimited choice. UK pension legislation, supplemented by FCA conduct rules, draws clear boundaries around what a SIPP can and cannot hold, and the tax consequences of getting it wrong are significant.

This guide explains, for the 2026/27 tax year, the main categories of allowable and restricted investments in a SIPP, how the 'taxable property' regime works, and what UK investors should look out for. It is general information only. Pension decisions, particularly those involving non-mainstream investments, should be taken with the help of a regulated financial adviser, pension specialist or Accountant.

Who Sets the Rules?

Two regulatory frameworks shape what a SIPP can hold. HMRC, via the Finance Act 2004 and the Pensions Tax Manual (PTM), sets out the tax rules for registered pension schemes, including the categories of investment that trigger 'unauthorised payments' or 'taxable property' charges. The Financial Conduct Authority (FCA) regulates the SIPP operator and advisers, and applies conduct rules around Due Diligence, suitability and consumer protection.

In practice, SIPP operators publish a list of 'permitted assets' that they will accept on their platform. That list is usually narrower than the absolute legal maximum, because operators apply their own commercial and risk filters on top of HMRC and FCA rules.

What a SIPP Can Typically Hold

The above list is illustrative. Every SIPP operator will have a defined investment menu, and not all platforms accept every type of asset above. A 'platform SIPP' is typically restricted to funds, shares, ETFs and investment trusts. A 'full SIPP' adds capacity for commercial property and certain other specialist holdings.

  • Authorised UK funds — open-ended investment companies (OEICs) and unit trusts.
  • UK and overseas shares listed on recognised stock exchanges.
  • Exchange-traded funds (ETFs) and exchange-traded commodities (ETCs).
  • Investment trusts listed on the London Stock Exchange.
  • UK government gilts and corporate bonds.
  • Cash and Money Market funds.
  • UK commercial property (full SIPPs only).
  • Certain insurance-backed pension contracts and structured products from regulated providers.

What a SIPP Generally Cannot Hold

The taxable property charges

If a SIPP acquires taxable property, HMRC's Pensions Tax Manual sets out tax charges that fall on the scheme administrator and the member. These include an unauthorised payment charge of 40% of the value, a potential Surcharge of 15% where the breach exceeds certain thresholds, a scheme sanction charge on the administrator, and an annual benefit charge on the use of the asset. In combination, the charges typically destroy the value of the investment, which is why most SIPP operators will simply refuse to acquire prohibited assets.

  • Residential property held directly (apart from very narrow exceptions).
  • Holiday lets, buy-to-let property and student lets held directly.
  • Tangible moveable property — classic cars, antiques, fine wine, jewellery, art and other personal chattels.
  • Property used by a connected party in a way that fails HMRC's tests.
  • Loans to the scheme member or connected parties (these are unauthorised payments and prohibited).

Residential Property: The Rules in Detail

Indirect residential exposure

SIPPs can typically gain residential property exposure indirectly through pooled vehicles such as Real Estate Investment Trusts (REITs), property unit trusts and OEICs. To qualify for relief from the taxable property regime, these vehicles must be 'genuinely diverse' commercial vehicles meeting HMRC's tests. SIPP operators publish guidance on which vehicles they accept.

Commercial Property in a SIPP

Offices, shops, warehouses, factories, surgeries and other UK commercial premises can be held in a full SIPP. Members often use this to buy their own Business premises, with the SIPP letting the property to the trading company on commercial terms. Commercial property in a SIPP is illiquid, must be valued regularly, and brings ongoing landlord responsibilities. SIPP commercial property is examined in detail in separate guides.

High-Risk and Non-Standard Investments

Some SIPPs allow non-standard investments such as unregulated collective investment schemes (UCIS), overseas property bonds, store pods, car park investments, forestry schemes and other specialist assets. These are not always prohibited by HMRC, but they have featured prominently in FCA enforcement cases and pension scam reports.

The FCA has tightened SIPP operator due diligence requirements over many years, and the Financial Services Compensation Scheme (FSCS) has paid significant compensation in cases where unsuitable investments were placed inside SIPP wrappers. The FCA's ScamSmart resource warns savers to be cautious of any cold call, unsolicited offer or 'guaranteed return' linked to a pension.

Connected Party Rules

HMRC pays particular attention to transactions between a SIPP and people connected with the member — spouses, civil partners, certain relatives, companies controlled by the member and related trusts. A SIPP cannot, for example, lend to the member or buy an asset from the member at over- or under-Market Value. Even allowable transactions, such as renting commercial property to a connected business, must be carried out on arm's-length commercial terms with proper documentation.

Tax Treatment of Investments Inside a SIPP

Income and gains generated by allowable investments inside a SIPP are generally free from UK income tax and Capital Gains Tax. Dividend tax withheld at source may not always be reclaimable. Tax-free cash on Withdrawal is limited by the Lump Sum Allowance (LSA) of £268,275, with the Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100 setting the wider lifetime tax-free cap following the abolition of the lifetime allowance from 6 April 2024.

FCA Due Diligence on SIPP Operators

Following high-profile cases involving unsuitable investments, the FCA has required SIPP operators to conduct robust due diligence on investments they accept on their platform. That includes reviewing the nature of the investment, the firm behind it, the Marketing material, the suitability of the asset for inclusion in a pension and the level of consumer risk. The Financial Ombudsman Service has upheld a number of complaints where operators accepted assets without sufficient diligence, and the FSCS has paid compensation in many of those cases.

While due diligence is the operator's responsibility, savers should still ask basic questions before agreeing to an investment: Is the investment FCA-authorised? Is it on a recognised exchange? Is there a clear exit route? Has the operator confirmed in writing that it is allowable inside a SIPP?

What Happens If You Get It Wrong?

Buying a prohibited or taxable asset can trigger an unauthorised payment charge of 40% of the value, plus a surcharge of 15% where the unauthorised payments breach a threshold, plus a scheme sanction charge of 15% to 40% on the administrator, plus annual benefit charges on any direct or indirect use of the asset. The combined effect typically outweighs any investment return.

Reputable SIPP operators run pre-purchase checks specifically to prevent these breaches. Even so, savers should not rely solely on their operator and should ask for written confirmation that a proposed investment is allowable before committing funds.

SIPP Investments at a Glance

A high-level summary of what a SIPP can typically hold and what it cannot.

Key Takeaways

  • SIPP investment rules are set by HMRC and supplemented by FCA conduct rules on operators and advisers.
  • Mainstream investments — funds, shares, ETFs, investment trusts, gilts and bonds — are normally allowed.
  • Direct holdings of residential property and personal chattels are largely prohibited under the taxable property regime.
  • Indirect residential exposure through REITs and genuinely diverse pooled vehicles is generally allowed.
  • Non-standard investments carry significant risk and have featured in pension scam cases.
  • Breaches of HMRC rules can trigger combined tax charges of more than 50% of the amount involved.
  • Specialist advice should always be obtained for unusual or high-value SIPP investments.