05: Taxable investments

Up until December 2005, the government had said that it would impose virtually no restrictions on what investments could be held within a SIPP or a SSAS. This prompted much speculation in the press about higher rate taxpayers using their pension arrangements to invest in vintage cars, fine wine, buy-to-let properties and Spanish villas. The Chancellor responded to these scare stories by introducing special tax rules that apply to residential property and chattels, eg art, antiques and other collectibles.

These rules make investment in residential property and chattels extremely unattractive from a tax viewpoint: the maximum tax charge can be 104% of the investment’s value, most of which would fall on the member. Some forms of indirect investment in property and chattels are exempt from the tax penalty, but the definitions are strictly drawn.

Unfortunately, the way in which the legislation operates potentially catches pension scheme investment by a controlling director in the shares of their unlisted company. While there is a limited exemption indirect investment in chattels with a market value of no more than £6,000, many providers ban investment in chattels and member-related unlisted securities. However, some SIPPs and SSASs do permit investment in suitably structured residential property funds.Last Updated