Investing In Property With Your Pension
Self-Administered Pension Schemes
Investing in property with your pension is possible through a Self-Administered Pension Scheme or Self Directed Pension Trust as they are otherwise known. One of the key features of a Self-Administered Pension Scheme is the complete flexibility and control over your retirement wealth creation. Your scheme can invest directly in residential and commercial property (However, it is important to point out that current lending rules only permit mortgage borrowings for residential property).
What are the advantages of investing in property with your pension?
- Your property is purchased from gross income; you and your employer (where applicable) can contribute to a pension on your behalf and receive tax relief on the contribution.
- All purchase costs are met by the pension fund, i.e. stamp duty, solicitor’s fees, property fit-out.
- The rental income from your property is paid to the pension fund and is exempt from income tax.
- There is no Capital Gains Tax on the sale of the property.
Are there any restrictions on what type of property you can purchase through self-administered pension schemes?
Yes, the investment must comply with the following (arms length) rules:
- The vendor must not in any way be related to yourself, your employer, its directors and associated companies.
- The property cannot be sold or let to relatives, your employer or its directors and associated companies.
- The development of a property with a view to its disposal is not allowed.
- Personal use of the property is prohibited.
What happens to the property when I retire?
- Your property can transfer in-specie to your Approved Retirement Fund (ARF) when you retire.
- There is no stamp duty on the transfer and the rental income continues to be paid to the ARF exempt from income tax.
- There is no Capital Gains Tax if you sell the property in the ARF.
Can I borrow to fund the purchase of the property?
Yes, you can fund the purchase of a property through self-administered pension schemes with bank borrowings. The loan must comply with the following rules:
- Loans must be on a limited recourse basis, i.e. the bank has security over the property only.
- The loan term must be a maximum of 15 years with a maximum loan-to-value ratio (LTV) of 50%.
- The granting of the loan is subject to the bank’s lending criteria; Platinum Financial cannot guarantee loan approval (but we can certainly help with the application and have access to most lenders in the Irish market).
Who looks after the property management?
It is important that a Property Manager is appointed to manage the property.
The Property Manager pays the rental income into the self-administered pension schemes bank account after discharging any expenses and provides rental accounts annually.
A list of approved Property Managers is available on request.
Can I use my existing pension with an insurance company to fund the property purchase?
Yes, you can transfer your existing traditional insurance company pension into a self-administered pension scheme. This can be easily arranged and we will look after the transfer on your behalf.
For more information on investing in property with your pension or to discuss other pension options contact us via our contact page or call us on 01-2865211.