Property through a Pension

Property through a Pension

There are a number of ways to buy Property using a Pension fund. The most common of these are :

Pension backed :

  • You buy a Property with a Mortgage taken out on an interest only basis.
  • At the same time you arrange a Pension plan which is designed to produce a lump sum to clear the Mortgage at the end of a specified term.
    This is the easiest way to buy Property using the benefits of a Pension plan as there are less restrictions attached - unlike the other products referred to below.
    In addition you own the Property and can use it for your own purposes.
    We say : suitable for all levels of purchaser - subject to having the Income and being able to afford a Mortgage in the first instance.

    Self Directed/Admin option :

    Under this type of arrangement, your Pension scheme actually buys and owns the Property - so it is not in your name.
    This is the most tax efficient way because not only do you obtain a tax deduction for the cost of funding the deposit and all costs associated with buying the property, but all Income and Expense is within a tax shelter and there are no Capital Gains tax implications on selling the Property.
    However restrictions include :
  • The maximum loan available is 60/70% of the cost of the Property - so you must have at least 30/40% of the price plus all costs already in your Pension scheme
  • Interest only is not an option
  • Maximum Loan period is 15 years
  • The property must be held at arm's length to the Pension beneficiary - you cannot buy the property from an associated party nor can the property be used by you, your family or any business which you own.

    We say : only suited to higher income earners >€100k p.a. who can afford €20,000 + p.a. in to a Pension and whose Pension fund is valued above €100,000 - this value can also be achieved by a Pension transfer from an existing scheme.
    Banks have become more reluctant lending - and in to Pension schemes to buy Property - your case would need to stand up strongly on it's own merits


    Which countries can you buy Property in ?
    At present this is confined to Ireland (North & South) and UK.