Investments, property and borrowing - frequently asked questions

Your questions answered.

The maximum amount that any scheme or plan can borrow is 50% of the current value, less any outstanding loans. 100% of the assets plus any borrowings can be used to purchase an asset, for example the scheme or plan can purchase an asset worth 150% of the current value of the scheme or plan.

HMRC Pensions Tax Manual - PTM124000: Restrictions when borrowing money by registered pension schemes

No, it could be used to buy other assets, for example stocks and shares or to make a loan back to the principal employer (occupational pension schemes only).

HMRC Pensions Tax Manual - PTM120000: Investments: contents

HMRC Pensions Tax Manual - PTM125000: Investments: taxable property: contents

Assuming the scheme rules allow it, any registered pension scheme is able to borrow money.

HMRC Pensions Tax Manual - PTM124000: Borrowing

A SSAS can lend to a sponsoring employer or to a third party. A SIPP can only lend to a third party. Loans to members or those connected to a member are not allowed. The loan must not be granted for more than 5 years, but under certain circumstances the loan can be extended by up to 5 years. 

HMRC Pensions Tax Manual - PTM123000: loans: contents

HMRC Pensions Tax Manual - PTM123200: Term of loan

No, with limited exceptions this will be a prohibited investment and if residential property is purchased the scheme may become de-registered which would result in a tax charge equal to 40% of the value of the scheme assets. On top of this there will be additional tax charges.

HMRC Pensions Tax Manual - PTM125200: Investments: taxable property: residential property

HMRC Pensions Tax Manual - PTM124000: Effect of unauthorised borrowing - money purchase arrangements and other arrangements

Commercial rent will need to be paid. If somebody uses the property for personal use, and commercial rent is not paid, HMRC will impose a tax charge on the member.

HMRC Pensions Tax Manual - PTM121000: Commercial property

Yes. Up to 5% of the fund value of the assets can be held in shares of the sponsoring employer or an associated company, if the scheme is an occupational pension scheme. SIPPs can't be used in this way as there is no sponsoring employer.

HMRC Pensions Tax Manual: PTM122000: Shares and equities

Up to 5% of the market value of the assets of the pension scheme can be held in shares of the employer or an associated company. There is no limit on the amount of shares that can be held in other companies. Where there is more than one sponsoring employer up to 20% of the market value of the assets of the pension scheme can be held in shares of these companies, subject to shares in any one of these employers not being more than 5%.

HMRC Pensions Tax Manual - PTM122000: Shares and equities

The meaning of a connected:

A person is connected with an individual if that person is:

  • the spouse or civil partner of the individual
  • a relative of the individual
  • a relative of the individual’s spouse or civil partner
  • the spouse or civil partner of a relative of the individual
  • the spouse or civil partner of a relative of the individual’s spouse or civil partner

A person in his capacity as trustee of a settlement is connected with:

  • any individual who, in relation to the settlement, is a settlor
  • any person who is connected with such an individual (see above)
  • any body corporate which is connected with that settlement (that is, it is either a close company (or only not a close company because it is not resident in the United Kingdom)) or it is controlled by such a company

A company is connected with another company if:

  • The same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him have control of the other.
  • A group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected.

A company is connected with another person if that person has control of it, or if that person and persons connected with him together have control of it.

Any two or more persons acting together to secure or exercise control of a company shall be treated in relation to that company as connected with one another, and with any person acting on the directions of any of them to secure or exercise control of the company.

Meaning of ‘company’
‘Company’ includes any corporate body or unincorporated association, but does not include a partnership, and this section shall apply in relation to any unit trust scheme as if the scheme were a company and as if the rights of the unit holders were shares in the company.

Meaning of ‘relative’
‘Relative’ means brother, sister, ancestor (parent, grandparent, great-grandparent and so on) or lineal descendant (child, grandchild, great-grandchild and so on).

HMRC Pensions Tax Manual - PTM:027000: General principles: connected persons


The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.