Self-invested personal pensions (SIPPs)
Produced in partnership with Alistair Hill of CMS

The following Pensions practice note produced in partnership with Alistair Hill of CMS provides comprehensive and up to date legal information covering:

  • Self-invested personal pensions (SIPPs)
  • Legislative background
  • Establishing and registering a self-invested personal pension scheme
  • Governing documentation
  • Contributions and benefits
  • Investments
  • Taxable property

Self-invested personal pensions (SIPPs)

When personal pensions were first introduced in April 1988, they could only be established by authorised banking, insurance or unit trust organisations.

There was a clear expectation that the personal pensions offered by these institutions would provide investment opportunities that broadly corresponded (and would be restricted) to their core business activities of banking, long-term insurance and the provision of unit trusts.

However, no such restrictions were set out in the legislation and HM Revenue & Customs (HMRC) issued a statement (Joint Office Memorandum 101) setting out the circumstances in which it would be willing to approve personal pension schemes that offered members wider investment choices.

Under current conditions, these so-called self-invested personal pension schemes (SIPPs) can allow a member to have almost complete autonomy in determining the investments that are to be made.

In many cases, this freedom of choice extends little further than the free selection of managed funds, cash (often restricted to only one currency - sterling) and listed shares. However, in some cases, significantly greater freedom may exist, allowing members to invest in, eg personally-selected real estate, derivative contracts and loans to third parties.

Legislative background

When SIPPs were first introduced as a concept, the conditions for their approval were discretionary in nature.

The Personal Pension Schemes (Restriction on Discretion to Approve) (Permitted Investments) Regulations 2001 introduced a definition of SIPP and, where a personal

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