You can hold all kinds of investments in a SIPP, from stocks and shares to commercial property. You have countless investment opportunities, but what’s most important is that you’re informed about the processes themselves. What fees can you expect? Are there any rules or regulations I should know about? Am I fully aware of the risks involved?
These questions are of increasing relevance when it comes to cryptocurrency. Like many investment opportunities, investing your pension funds into bitcoin and associated cryptocurrencies requires you to be fully committed to the investment and aware of all the risks involved. In other words, you need to be fully informed.
Which is what this article sets out to do. If you would like to build your bitcoin pension savings in a safe way, then start here with our comprehensive guide.
Cryptocurrency trading for beginners – what do I need to know?
In this section, we’re going to go into exactly what cryptocurrency trading is. If you’re already trading in cryptocurrency, feel free to skip this section and resume the article below.
What is cryptocurrency?
Cryptocurrency is a digital or virtual form of currency that is made secure by cryptography. Cryptographic security means that cryptocurrency is nearly impossible to counterfeit and since cryptocurrency is not issued by any central or mainstream banking authority it is not subject to any government-mandated policies.
Cryptocurrency is distributed across a large number of computers built using blockchain technology. Blockchain technology are systems of organisational methods which works to secure the integrity and confidentiality of transactional data.
What are the different types of cryptocurrency?
Bitcoin was the first blockchain-based cryptocurrency and it’s the one that most people will be aware of. There are now thousands of alternative cryptocurrencies, with differing functions. To those in the know, the alternatives to Bitcoin are often termed ‘altcoins’ (these include Litecoin, Peercoin, Ethereum, and Namecoin).
Can I hold cryptocurrency investments in a SIPP?
Onto the main feature of the article. If you are looking to hold various crypto assets in your SIPP, there are a number of things you need to be aware of. Because holding cryptocurrencies in a SIPP scheme is such a contested issue, we’ve looked at both the pros and cons of doing so.
Pros of holding cryptocurrency investments in a SIPP
- Timed right, the rewards will far outweigh the (highly significant) risks. Cryptocurrency investments are unregulated and are not governed by the same regulations that most mainstream bank-backed investment opportunities. However, if you time the market right (a very risky proposition in itself) then the rewards may be vast.
- Because it’s unregulated, you won’t be subject to any limitations. Holding crypto investments in a SIPP is very risky, however, if you’re comfortable with the risk aspects (which we’ll get onto shortly) then you may stand to benefit from things like government regulation or other interference which may limit your profit potential.
- Traditionally, most mainstream banks/financial institutions stay away from the prospect of holding crypto investments in pension products. However, Hargreaves Lansdown is making big steps in making this available to customers. In the coming years, it’s likely that other institutions will follow suit. What this means for you is that there will be more assistance should you decide to go down this route.
Cons of holding cryptocurrencies in a SIPP
- The most glaring con is that cryptocurrencies remain unregulated and will continue to be unregulated. FCA regulation is vital if you want to protect your financial interests from ventures that may be high-risk.
- As an added point to the above, cryptocurrency investing is notoriously volatile. Holding crypto assets in a SIPP should be reserved for people who are not only comfortable with the risk but who can afford to take the lows with the highs. If you’re a high earner with complete financial security, then you should be well suited.
- There are numerous elements of risk to consider. Most investing is out of your hands where risk is concerned, but you’re usually able to mediate risk at any stage. With cryptocurrency, you have technology risks, liquidity risks, volatility risks, and counterparty risks. It pays to know everything about these risks before you begin the process.
Can you buy bitcoin in a SIPP?
If you are asking yourself “can I invest my pension in bitcoin?” then the answer is yes, of course. You can buy a Bitcoin Exchange Traded Note (ETN) which will track the progress of your crypto investments. The aforementioned Hargreaves Lansdown provides this ETN on its own platform, so you’ll be able to hold your crypto assets in one of their SIPP products.
Bitcoin SIPP investing in the UK is prone to grey areas simply because it’s not regulated, so we issue a word of warning at this point. If you have a stomach for the volatility of crypto assets and you’re comfortable with the risk elements, buying bitcoin in a SIPP may be a very profitable option.
It’s vital that you have as much information behind you as possible, especially before making such a big decision as the ones highlighted above. We have plenty of similar resources over on our blog, so be sure to take a look.
The following articles may be of interest to you:
- What counts as a high-risk investment?
- 30 financial terms you need to know
- Seven questions to ask a potential SIPP provider
Visit our SIPP claims page for more guidance on making a SIPP claim, and take a look at our testimonials where you will find countless accounts of people who sought out the financial expertise of our team.