There is nothing specific in the legislation governing pensions to prevent a pension investing in alternative finance products. However there are a number of concerns to be considered for SIPPs and SSASs such as:

• there are rules on such pensions lending funds to the pension member and their connected parties, which includes companies they control or partnerships of which they are a partner.
• the loans will often be secured on property or other assets, and the pension scheme may on enforcement of the security be the owner (or beneficial owner) of the property or other assets. This could be a concern if it is residential property or property that includes tangible moveable assets or indeed tangible moveable assets directly.
• if a pension scheme lends funds to a person and that person uses those funds to purchase residential property or other taxable property, the pension scheme may attract a tax charge

See investing through a pension scheme under alternative investments for more information on the HMRC and FCA issues on investing in alternative finance products via a pension scheme.

Often where loans are secured there will be a security trustee that will take ownership of the assets with the role of realising the assets and distributing the proceeds to the investors. This provides an element of defence but the pension scheme could still be seen to be owning the taxable property indirectly.

See pensions tax & investments under alternative investments for more information on what constitutes taxable property, unauthorised payments and other restrictions.