What assets can I hold in an SIPP?

A Self Invested Personal Pension (SIPP) allows an investor to take charge of their own investment destiny. There are a number of online SIPP providers. It's easy to move an existing personal pension into a SIPP, or you can open one with cash.

A wide range of investments can be held within a SIPP. Most investors stick to stocks and shares - but they're missing out!

As always, do your own research before making any investment, and if in doubt then consult an indepedant financial advisor.

Exchange Traded Funds (ETFs) are increasingly popular with private investors, and are an alternative to holding unit trusts within a SIPP. ETFs are bought and sold like shares, so they attract dealing charges. Many are based offshore and consequently there is sometimes no need to pay stamp duty when purchasing an ETF.

ETFs generally have much lower annual charges compared to unit trusts - over the course of the term a SIPP is normally held for this could result in a signifiant reduction in costs and hence much higher capital growth.

Two ETF providers particularly popular with SIPP investors are iShares and ETFS Securities. iShares provides a wide range of ETFs that allow investors to buy investments in shares, corporate bonds, commercial property and government bonds (Gilts). ETFS Securities started off by offering ETFs that track the price of physical metals such as gold and silver, as well as agricultural commodities such as wheat and soybeans, livestock and energy commodities such as oil, petrol and natural gas.

One of the most popular types of investment held within a SIPP is a unit trust. These are managed by fund managers and tend to invest in a specific theme such as equity income or corporate bonds. As well as actively managed unit trusts there are also tracker funds that track a specific stock market index such as the FTSE 100 or FTSE 250. Tracker funds tend to have lower annual charges compared to actively managed funds.

Popular unit trust fund managers include Jupiter, Newton and Schroeders. HSBC maintain a portfolio of very low cost tracker funds useful for holding in a SIPP.

Many unit trusts have large initial charges of up to 5% thankfully some or all of these initial charges will be refunded by many online discount SIPP/ISA providers.

Unit trusts also have annual charges, and some levy additional performance charges. A good way to compare the cost of holding different unit trusts is to compare their Total Expense Ratio (TER), which takes into account all the charges levied by the fund over the course of the year. A TER may be as high as 1.75% for some specialised unit trusts, whereas a FTSE 100 tracker unit trust may only have a TER of 0.5%. A lower TER will have a significant benefit on the total return when investments such as SIPPs are held for a long time period.

Private equity invests in privately owned companies. Often these companies have been bought at knockdown prices and turned around, or are new rapidly growing companies in sectors such as technology.

The iShares S&P Listed Private Equity (IPRV) ETF invests in a number of private equity companies such as Blackstone and 3I Group as their shares can be easily traded.

Private equity is considered a high risk investment, and values of private equity companies fell substantially in 2008 due to high levels of borrowing plus the values of their holdings being written down substantially.

Most SIPP investors stick to UK based equity and bond investments. But there are a huge number of overseas investments that may be held within a SIPP. There are a large number of unit trusts that allow investors to invest money overseas. An increasing number of overseas themed ETFs are also available, such as the iShares BRIC 50 which invests in the 50 largest companies from Brazil, Russia, India and China. Popular overseas investment themes include the BRIC nations, the Asia Pacific region, Japan, Europe and Eastern Europe. iShares also has a number of ETFs that invest in individual countries - ETFs that invest solely in Canada, South Africa and Australia were introduced in early 2010.

When buying overseas investments it is also possible to diversify into different investment classes. Overseas equity, corporate bonds, government bonds (including emerging market debt) and commercial property are some of the investment themes. Emerging market debt has been particularly popular due to the fact that developing countries have learned from the 1980's and 1990's and are now considered much better at managing their government debt levels.

One big advantage of a SIPP is that it is possible to hold your own commercial property within a SIPP. This is enormously attractive for small and medium business owners who own their own retail unit or warehouse or other commercial business premises. The only problem is that not many SIPP providers actually allow this type of investment to be held within their SIPPs. The SIPP Centre is one such provider that does. Discount SIPP brokers tend to only offer the standard investment choices such as unit trusts, ETFs and bonds.

For investors who don't own their own investments it's still possible to invest in commercial property. There are a large number of commercial property unit trusts and ETFs to choose from. It's also possible to buy shares in real estate companies, such as the many Real Estate Investment Trusts (REITs) such as British Land and Land Securities.

Commercial property funds usually pay dividends, and there is also the chance of significant capital growth should the property holdings rise in value. Commercial property is best as a long term holding, since many commercial property unit trusts sometimes suspend redemptions from the fund should outflows from the fund exceed new investments into the fund. As such commercial property is nice to hold in a SIPP, due to the long term nature of pension investing.

There are a number of ways of investing in precious metals via a SIPP. Although it's theoretically possible to place your own collectibles (such as gold and silver coins) in a SIPP, few SIPP providers actually provide this service.

An alternative is to invest in precious metal Exchange Traded Funds. The most popular precious metals are gold and silver, although platinum and palladium are also worth a look. ETFS Securities has a number of precious metals ETFs that allow investors to invest in precious metals. The bars of the metal are stored in bank vaults so it can be safer than storing precious metals at home. ETFS Securities even offer a gold ETF that invests in gold bars held in Swiss bank vaults.

If you don't own any physical gold, the a gold mine might be the next best thing! Gold themed unit trusts include BlackRock's Gold & General fund and the Investec Global Gold fund - these invest in mining company shares.

A lot of gold and silver mining companies are also listed on the London Stock Exchange so their shares can be directly held within a SIPP. Examples of London listed mining companies include Randgold Resources (the gold miner) and Fresnillo (a major silver mining company). These companies are listed in London but their mines are overseas - the UK reserves of gold were mined out centuries ago!

The author of this article is not authorised to give financial advice. This article is for information only does not consitute financial advice. Before making investment decisions consult an independent financial advisor.