Purchase a property with your pension fund

Typically, most pension funds invest in a mix of assets that combine a portfolio of equities (shares in international companies), government bonds, property and cash.

But there is also another option which many private pension holders may not be aware of – they can set up a self-administered pension to purchase residential and commercial property or other alternative investments such as renewable energy, gold etc..

Property investments have been the big success story over the past few years and some of our clients have purchased bargain properties at attractive rental income yields through their pension. If you are in the market looking for a property and have a built up a healthy pension fund, the return on your investment will be far higher through your pension due to the tax reliefs that are available.

If you purchase a property through your pension fund, there won’t be any tax on rental income received whereas if you own a property personally, you will have to pay up to 40% income tax, 4% PRSI and 6% USC. In addition, if your pension sells the property for a profit at a later date, the gain is exempt from 33% capital gains tax that applies to personal investments.

There are certain Revenue Rules you must comply with and you will need to have built up a value in your pension fund in the past to fund the purchase of the property. Alternatively, company directors who have built up cash reserves in their company can invest a once-off contribution into their pension plan to provide the funds for the purchase. If you don’t have sufficient funds in your pension to buy an investment property, we do have access to a mortgage provider who will lend up to 50% the value of the property once certain criteria are met.

While there is a good opportunity for high returns in property, there are risks involved and it won’t be suitable for everyone. As always, you should seek independent financial advice to determine how best to invest your pension.