Considering buying a property with your pension fund?

Using your pension fund to buy a property is now a viable and attractive proposition.

All gains and income within pension schemes are free from tax. Property prices are increasing and rental demand showing no immediate signs of cooling. If you have a pension fund built up, then now could be a good time to consider and review your options with one of our professional advisors.

The key asset selection decision, particularly approaching or in retirement is how to use your pension money to generate an income and possibly capital growth. After considering all annuity options, it is clear for many that this option is now becoming less attractive;

• You can select the asset to generate your income and capital growth.

• Property can be either residential or commercial or both.

• You can use your fund to buy a property with a portion of your pension assets (there is an option to borrow 50% of the cost, terms and conditions apply - credit agreement required).

• Rental income is paid to your pension fund account Income Tax tax free.

• There is no Capital Gains Tax payable on the sale of the property or when you convert to an ARF/AMRF.

• Chargeable expenses can be paid from the Pension deposit account.

Some of the Risks

WARNING: PROPERTY IS AN ILLIQUID INVESTMENT AND IN THE EVENT OF DEATH OR SERIOUS ILLNESS THERE MAY BE A DELAY IN ACCESS TO YOUR PENSION FUND.WARNING: IF YOU INVEST INTO THIS PRODUCT YOU MAY LOSE SOME OR ALL OF THE MONEY THAT YOU INVEST.WARNING: YOU WILL NOT BE ABLE TO ACCESS YOUR PENSION FUND UNTIL YOU REACH 60 AND/OR RETIREMENT AGE.

• Before any change is made, you will need to consider and review your overall appetite to risk. It is likely that using your pension fund to buy a property will require a large portion of your overall fund. This will mean that you will have a concentration of property in your pension fund and very limited diversification.

• Ensuring there is a plan for longer term liquidity and access to tax-free cash is a vital item to cover off with your advisor.

• Whilst property is an attractive investment right now, there is a risk that your asset class may fall significantly in value, your tenant may not pay rent on time and tax law may change. Property is generally an illiquid asset and if your health changes, you may be forced to sell the asset at a time when it is not financially beneficial to do so. There is a risk that you may be unable to sell the property for a protracted period.

• Before you ever surrender an existing pension contract check the hidden costs. Are there encashment or surrender fees, is there an higher annual charge, does my existing fund have protected benefits at retirement, is there a protected annuity rate (for some contracts these can be high as 11.76% or 9.71% per annum). You may be a member of a defined benefit scheme and transferring your pension to a new defined contribution scheme will involve giving up valuable longer term guarantees.

Next steps

1. We can establish if your current pension structure will facilitate a direct property purchase. For example, Small Self Administered Pension Schemes can be used, PRSAs, Executive Director Pensions and ARF/AMRFs (subject to provider).

2. Alternatively, a qualifying structure can be established. NB. There may be charges and protected benefits lost if you change provider and cancel an existing contract. We will help you check the hidden costs before any changes agreed.

3. Appoint Pension Trustee.

4. Revenue Approval may be required.

5. Appoint Solicitor.

6. Select property.

7. Transfer funds.

8. Purchase property and incur purchasing expenses.

9. Rental income paid into Pension fund deposit account.

Want to know more? We are available to discuss your options, and we look forward to hearing from you.

Our job is to help you choose a product and structure that will help you meet your goals.

telephone | 091441188 and/or email | office@nelsonlife.ie

RETIREMENT & PENSIONS |  INVESTMENTS | FINANCIAL PLANNING | LIFE INSURANCE

Nelson Life Limited trading as Nelson Life is regulated by the Central Bank of Ireland.

WARNING: Past performance is not a reliable guide to future performance. WARNING: The value of your investment may go down as well as up. WARNING: You may lose some or all of the money you invest. WARNING: These funds may be affected by changes in currency exchange rates. WARNING: If you invest into this product you will have access until you retire (Pension Products). WARNING: The above content does not constitute investment advice, as it does not take into account the investment objectives, knowledge and experience of financial situation of any particular person. Prospective investors are advised to make their own assessment of the information contained herein and to obtain professional advice suitable to their own individual circumstances. WARNING: The information contained in this document is based on our understanding of current tax legislation and the current Revenue Commissioners interpretation thereof and is subject to change including retrospectively without notice. This is intended as a general guide only and is not a substitute for professional tax, legal and investment advice.