Over a fifth of self-invested personal pension providers are still refusing to allow investors to hold private equity within their SIPP despite significant demand from investors, according to new research from UK investment club Hotbed.

But the majority (53 per cent) of respondents who do allow private equity say that investing in unquoted companies has been a growth area for SIPPs since then.

However, even of those that do allow it, almost half said that they impose their own additional restrictions on unquoted company investments, other than those already imposed by law. For example, many impose a maximum limit on the proportion of the portfolio that can be allocated to private equity, even though under current SIPP rules there is no restriction on this.

Claire Madden, director of Hotbed, said: “Not allowing investors to exercise their own freedom of choice within the rules set down by the government undermines the whole concept of self-invested pensions. SIPP holders tend to be successful businesspeople who have built up substantial pension pots and are often attracted by the potential rewards of private equity.

“Some SIPP providers appear to see unquoted companies as just too difficult to bother with and are reluctant to try to accommodate these kinds of investments.”

The key reason cited for not allowing private equity was the difficulty in valuing companies. Nearly all (95 per cent) of SIPP providers surveyed said they allow SIPP holders to invest in hedge funds through their SIPP, 79 per cent in unquoted companies, 74 per cent in REITs and 37 per cent even allow them to invest in prisons.

Over a fifth of SIPP providers also restrict borrowing within SIPPs, according to Hotbed’s research. Twenty-one per cent said that they do not allow gearing, other than that secured against commercial property.