Can My Pension Fund Lend Money and or Borrow Money?
Published / Last Updated on 29/05/2025
As previously covered in other videos, selecting your own direct ‘permitted’ investments for your pension scheme rather than investing in collective funds offered by your pension provider or pension platform is available via:
- Private/Personal Schemes (Individual Money Purchase Arrangements): Self Invested Personal Pension Plan (SIPP), available to all.
- Company Pension Schemes (Occupational Money Purchase Schemes): Small Self-Administered Scheme (SSAS), a company pension scheme usually set up by Limited Company Shareholding Directors.
Loans and borrowing are both permitted under HMRC rules for pension investment, administration and management. There are subtle differences though but before we start, you should know that:
Pension funds cannot buy residential property. Your pension fund cannot buy a main home, a buy to let home or a holiday home. It could buy a hotel, it buy a pub (with caretaker accommodation), but you personally cannot live in it or derive any personal benefit.
Pension Fund Borrowing or Pension Fund Mortgage
- A SIPP can borrow up to 50% of the current value of your pension fund e.g., if you have £200,000 in your SIPP, it could take a mortgage out in its name of 50% of the value i.e., £100,000 to buy a commercial property of say £300,000 with a commercial mortgage.
- Your SIPP could collectively buy commercial property or land with another SIPP e.g., a couple each with a SIPP could combine resources to jointly buy an office or shop or other commercial unit.
- A SSAS can also borrow up to 50% of the current value of your pension fund e.g., if you have £200,000 in your SSAS, it could take a mortgage out in its name of 50% of the value i.e., £100,000 to buy a commercial property.
- A SSAS is an employer sponsored pension scheme usually being a collective of between 1, 2 and up to 12 directors of a limited company, as SSAS pension scheme trustees and beneficial owners of their pension assets, so collectively could combine all funds to borrow even more with a commercial pension mortgages buy even larger commercial premises with their pension funds again providing the deposit.
Pension Fund Lending Money i.e., Pension Loans/Loan Back
- A SIPP can lend money provided it is on commercial terms and a viable investment for the SIPP.
- The loan must be on commercial terms and of benefit to the pension scheme as a viable investment.
- The loan cannot be to you the pension scheme owner or to connected party such as your spouse, civil partner, close relative. It must be to unconnected parties.
- Your SIPP can lend up to 100% of its fund value.
- A SSAS can also lend money provided it is on commercial terms and a viable investment for the SSAS.
- The loan must be on commercial terms and of benefit to the pension scheme as a viable investment.
- The loan can be to unconnected parties up to 100% of SSAS fund values.
- A SSAS can also lend to your company, the sponsoring employer (a SIPP cannot as it is a connected party) but it is restricted to 50% of the fund value of the SSAS fund value.
- It again must be viable, and the sponsoring employer business must be viable. It would be difficult for a SSAS to lend to a ‘start up’ business with no track record.
- It must on commercial terms.
- The interest rate charged by the SSAS to the sponsoring must a minimum of 1% above the average variable rate charged by the UK ‘Top Six’ banks
- It must be a secured loan on a ‘1st Charge’ on immovable, tangible business assets just like most mortgages are usually a 1st Charge.
Related:
Buy Private Co Shares with Pension
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