At Earnest we manage a large number of our client’s Pension Properties and so we know all about the advantages of investing in property through your pension. Everyone knows there is an income tax benefit to saving in a pension and a big tax benefit at that, but acquiring property through a self-administered pension scheme has some additional benefits that you may not be aware of.

1) You’re in Control
The first and possibly the most key benefit to purchasing a property through your pension is the fact that you have control over which property you buy. There are rules (Revenue “arms length” rules) about who you can’t buy from; however that doesn’t mean you can’t use your contacts and know-how to get a shrewd investment. This compared with having a fund manager making decisions on your behalf means you have far more control.

2) Commercial or Residential?
Residential and Commercial property make for very different investments. Where does your experience or knowledge lie? Maybe you have contacts in both? Whatever your reason, it’s important to know that you can choose to invest your pension in both Residential and Commercial property.

3) You’re a Cash buyer
When you decide to buy through your pension, you are essentially a cash buyer in the eyes of the Estate Agent or the Vendor. As you are not relying on borrowing, you should be able to complete the purchase of the property without delay and this can often make you a more favourable purchaser and in some cases it can even get you a reduced purchase price. Make sure to mention this to the Estate Agent.

4) Expenses are paid for
All expenses incurred from the purchase, during the letting and until you sell this property can be paid for directly out of the pension fund. That includes Estate Agent fees, solicitor’s costs, stamp duty, tenancy registration, maintenance works, refurbishment, water charges, local property tax and utility charges during vacant periods.

5) Borrowing is an option
Although there are a few criteria that you must meet, it is not unusual to borrow part of the amount required to purchase your Pension Property. Usually the loan terms are less than 15 years with a maximum loan-to-value ratio of 50%. In the current market, borrowing could be a viable option where in a declining market it is less likely for banks to lend.

6) Future Contributions
Purchasing one or more properties does not affect your ability to contribute to your pension and all further payments you make into the fund will still receive tax relief at the higher tax rate.

7) Rent Received is not taxable
All rental income received from the Pension Property is paid tax free into your pension fund. Consider this in comparison to a privately owned investment property where you might be paying c. 41% income tax, 7% PRSI and 4% USC.

8) Lump sum at retirement
As usual, when you reach retirement, you can take a tax free lump sum of 25% of the total value of your pension assets, up to €200,000. If you need to, you can sell the property at this point in order to take advantage of the above. Or you can hold onto it and transfer it to a self-administered ARF and you can continue to generate a post retirement income.

9) No Capital Gains Tax
There is no capital gains tax if you sell the property in the future, unlike a personal investor who may have to pay 33% on any gains. This is a substantial saving and a big benefit to purchasing a property through your pension.

10) Part ownership
You can pool your pension assets together with a friend or spouse for example if you wish to purchase a property together. Again this may be a great option if you did not want to borrow etc.

If you are thinking of buying a Pension Property give us a call and see how we can help.


Please take the above as a guide only, and if you are interested in purchasing a property, please speak to your financial advisor as it may not be suitable for everyone.