Investing in gold bullion through a SIPP explained

Investment-grade gold bullion (gold bullion) can be held within a Self Invested Personal Pension (SIPP) (depending on the SIPP provider’s permitted asset list) and is the only physical commodity with a specific exemption from being treated as taxable ‘tangible moveable property'. Gold bullion must meet strict purity and form requirements, used for investment purposes only, and must be held within a secure vault to the order of the SIPP provider’s trustee. Our case study below will look at how Amanda, an experienced investor, used this route to diversify her pension by transferring from an underperforming life office personal pension to a SIPP that could accommodate gold bullion.

Amanda’s current situation:

Amanda is an experienced investor with a portfolio of personal investments that are spread across a range of collectives, alongside a small portfolio of buy-to-let properties. She also holds an existing life office personal pension that is worth £70,000, which she started to feel had been underperforming in recent years.

At an annual review meeting, Amanda told her financial adviser Sarah, that she wanted to look at other investments for her pension money to complement her personal investment portfolio. Sarah outlined the wide range of investments that are available in personal pensions and SIPPs, and Amanda was drawn to the idea of physical commodities, specifically gold bullion.

Why did gold bullion interest Amanda?

Amanda felt that gold bullion represented a good investment that would help to diversify and enhance her overall investment portfolio. Sarah also pointed out that gold bullion can be a volatile investment with no guarantee of future returns, which Amanda fully accepted before proceeding.

What are the rules for holding gold bullion in a SIPP?

Sarah set out the key rules Amanda needed to understand before going ahead with the investment:

• A specific tax exemption: gold bullion has a specific exemption from being treated as ‘tangible moveable property’ (which would normally be ‘taxable’ property) within a SIPP, and it is the only physical commodity to benefit from this exemption.

• Minimum purity and form requirement: the gold bullion must be of a purity of no less than 995 thousandths and held in the form of a bar or wafer of a weight acceptable by the bullion markets. If this criteria is met, the gold bullion is investment-grade.

• Secure trustee-held storage: Amanda cannot hold the gold bullion personally; it must be held in a secure vault to the order of the SIPP provider’s trustee.

• Investment purposes only: Amanda cannot use or display the gold bullion, as it must be held purely for investment purposes.

• Custodian costs: there is likely to be a custodian fee for holding the gold bullion in a secure vault that covers storage and insurance.

Why did Amanda need to transfer to a SIPP?

Sarah explained that Amanda’s existing life office personal pension could not offer a physical gold choice, so Amanda would need to transfer to a suitable SIPP to make this investment. Following the review meeting, Sarah researched the market and found that some SIPP providers offer the facility to hold gold bullion cost-effectively, including her preferred provider, which allows it through a UK direct gold investment service. This service would provide Amanda with the required gold storage arrangements, with sufficient controls in place to ensure any monies are paid back solely into the SIPP’s bank account.

How did the purchase process work?

Sarah outlined the process Amanda needed to follow to invest her pension money in gold bullion:

1. Following a review of Amanda’s situation, Sarah recommends transferring to a SIPP that can accommodate gold bullion within its arrangement

2. Establish the current cash transfer value of her existing life office personal pension, allowing for any exit or transfer penalties

3. Establish a new SIPP

4. Transfer the cash from her life office personal pension into the new SIPP’s default bank account

5. Open a gold bullion account with the appropriate custodian and use the transferred monies to invest in gold bullion

6. Invest any remaining monies in line with Sarah’s investment recommendations, using an investment platform, or platforms, where appropriate.

Amanda takes Sarah’s advice on selecting a suitable SIPP provider and proceeded with the transfer and purchase of gold bullion.

Frequently Asked Questions (FAQs):

Can gold bullion be held within a SIPP?

Gold bullion can be held in a SIPP, provided that this facility is offered by the SIPP provider. It must also meet specific requirements around purity, form and custody arrangements to avoid tax charges.

Can I store my SIPP’s gold bullion personally?

It should not be possible to hold / store SIPP-owned gold bullion personally. This is because to do so would result in the gold bullion being deemed as taxable property by HMRC and, hence, subject to tax charges.

Does every SIPP provider offer gold bullion investments?

Not all SIPP providers offer the option of holding gold bullion within their products, instead preferring to restrict their investment proposition to investment funds. Those which do allow investment into gold bullion, are likely to have very specific requirements about its ownership within their products – typically to ensure that no tax charges arise through ownership of the gold bullion.

Can there be extra costs for holding gold bullion in a SIPP?

There are likely to be some additional charges for holding gold bullion in a SIPP compared to simply holding investment funds. This is because of the additional requirements (such as increased due diligence and so on) which should apply to gold bullion investment via pension schemes.

If you're considering investing in gold bullion through a SIPP, contact Dentons or speak with your financial adviser.

Dentons Pensions does not provide regulated financial advice. We only provide factual information on our own Dentons’ SIPP or SSAS products and the services we offer here at Dentons. We strongly advocate that clients obtain sound, regulated financial and/or investment advice regarding the suitability of a SIPP, SSAS or any investment.