Using Your SIPP for Borrowing

It is possible to use a SIPP (self invested personal pension) to borrow money against the value of the funds for legitimate investment purposes, subject to certain restrictions. As long as the administrator of the scheme is satisfied that the borrowing will benefit the scheme, then up to 50% of the value of the scheme's net assets may be borrowed.

For example, if a SIPP is worth £200,000, it can borrow £100,000 to give it a total value of £300,000 to invest. Any existing borrowing must be taken into account when calculating this limit. If a scheme borrows more than 50%, then it will be subject to a scheme sanction charge of 40% on the amount of borrowing over 50%.

A SIPP can borrow funds from any financial institution, company or individual, whether or not they are connected to the scheme. However the transaction must be bona fide (i.e. made on an arm's length basis), or it will result in a 40% tax charge.