Investing in Non-Standard Assets

September 18, 2020

Most people’s investment needs for their pensions can be met through standard assets, however for some, a more diverse and potentially speculative investment strategy may be preferred.

It is possible for a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) to invest into Non-Standard Assets, however there are a number of things to consider before pursuing this option.

What is a Non-Standard Asset?

All asset types must be categorised by SIPP providers as either ‘standard’ or ‘non-standard’. The Financial Conduct Authority has published a list of ‘standard assets’ and any assets which are not on this list and allowable within a pension scheme are automatically classed as a Non-Standard Asset.

What investments are classed as Non-Standard Assets?

Non-Standard investments include but are not limited to the following:

  • Shares in unquoted private companies
  • Third Party Loans
  • Unlisted Corporate Bonds / Loan Notes
  • Unregulated Collective Investment Schemes (UCIS)
  • Forestry and agricultural investments
  • An asset that cannot be readily valued, or realised within 30 days.

Non-Standard Asset – What to Consider?

There are a number of issues that require careful consideration before deciding to proceed with investing into a Non-Standard Asset including:

  • Investment Risk: Non-Standard Assets are typically higher risk and are often speculative. This may of course lead to greater investment returns; “risk v reward”
  • More complex valuations: for example, company shares are more difficult to value than a quoted equity
  • Future Saleability: Non-Standard Assets may be more difficult to sell as there may be a limited market for these types of assets
  • Investment Protection: Most Non-Standard Assets are not regulated by the Financial Conduct Authority or covered by Financial Services Compensation Scheme
  • Costs: Additional costs usually apply when investing in Non-Standard Assets

What is Expected of the SIPP/SSAS Provider?

Providers must have a robust due diligence process for the acceptance of Non-Standard Assets. This will involve requesting and reviewing detailed information before carrying out a comprehensive analysis of the investment before deciding on whether the asset can be held within the pension scheme.

Westerby will only permit Non-Standard Assets where a clients has received financial advice from a UK based FCA Authorised Financial Adviser or where they satisfy the FCA’s criteria for a High Net Worth or Sophisticated Investor.

Non-Standard Assets are not for everyone, but in some circumstances they may form part of a diversified pension plan.

You can get advice about your pension arrangements by speaking to a financial adviser who is authorised and regulated by the Financial Conduct Authority (FCA). If you do not already have a financial adviser, you can click here for guidance from the FCA on finding a suitable adviser.

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