Ever thought about buying property with your pension? Well now you can. Irish people have a love for property. It seems to be in our nature.
With returns on the traditional low risk assets, like cash and bonds at all time lows, many investors are back looking at property to get a return on their investment… If you feel property is a good choice of investment asset for you to grow wealth, the most tax efficient way to do this, is to purchase a property with your pension fund.
Why Purchase Property through your Pension?
There are a number of reasons to contemplate buying property through a Pension.
- You can use the existing Pension Fund you have accumulated to purchase the property
- You can get Tax Relief on any additional pension contributions you make at your marginal rate
- Pension Funds are tax exempt structures, therefore all rents accumulate tax free within the pension
- Any Capital Gain on subsequent property disposal is Tax Free when within the Pension Fund
- Whilst we don’t necessarily recommend it, the pension fund has the facility to borrow additional funds from a bank
- Joint purchases can be facilitated once the proper co-ownership agreement is in place.
What type of Pension can do this?
The type of pension that can do this is called a Self Administered or Self Directed arrangement, which is a Tax Efficient investment scheme that is suitable for Company Directors, the Self Employed and some employees. It is also suitable for those that have retired and who have funds currently residing in an Approved Retirement Fund. It allows you to enjoy the greatest level of control over your investment.
Like Everything you have to follow some Rules.
There are certain Revenue Rules that must be adhered to when purchasing a property through your pension. The main ones are as follows
- Your pension fund cannot purchase from, sell to or rent a property to a connected party (i.e. yourself, your business, your children or other family members)
- Property Development or Property Trading is not allowed
- The Pension must maintain sufficient liquidity to meet any costs (expected or unexpected) that may accrue.
So what do you do next?
The most important part is to educate yourself on how this works, before deciding whether it is the right course of action for you.To find out further information about this and to work through your specific situation please contact me, David Peavoy on 087-2902206 or alternatively by email on david@peavoyfinancial.ie
David Peavoy BA, QFA, LIAP is the Owner of Peavoy Financial Planning whose practice is based in Office 5b, Portlaoise Enterprise Centre, Clonminam Business Park, Portlaoise, Co Laois.
David Peavoy T/A Peavoy Financial Planning is regulated by the Central Bank of Ireland
Disclaimer: All data and information provided within this blog is for information purposes only. It should not be taken as specific advice for your situation. Peavoy Financial Planning makes no representations as to the accuracy. completeness, or suitability of any information and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its use
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