RPSM07300080 - Scheme Administrator Pages: Investments: Restrictions on borrowing

What borrowing restrictions are there for registered pension schemes?

A registered pension scheme may borrow money for any purpose, provided that it will in some way be of benefit to the scheme. The scheme may borrow an amount up to the equivalent of 50% of the net value of the fund prior to the borrowing taking place. The value of the fund for this purpose would not include the investment that is to be purchased with the borrowing.

Borrowing by registered pension schemes may be further limited by rules in the Pensions Act.

Where the borrowing exceeds the 50% limit, the scheme will be treated as making a scheme chargeable payment and the scheme administrator will be liable to a scheme sanction charge (see RPSM07108030).

The scheme administrator must report to HMRC details of borrowing that exceeds the 50% limit. Such reports are required when the borrowing exceeds the limit on or after 6 April 2010.

For further information on how to report unauthorised borrowing to HMRC, see RPSM12301810.