We Irish have an insatiable appetite for property that continues to stick with us and every day we see property transactions happening. The lack of available finance means the gearing risk has been taken out.
It is possible to use a self-administered pension scheme as the purchasing mechanism for property investments. The Irish property rental market is currently very strong with investors feeling there is value to be found there.
A key feature of self-administered pension scheme is the ability to take control so you can identify and acquire various properties. You have the ability to use your own market knowledge to access opportunities and significantly enhance your retirement asset. You can invest directly in residential and commercial property located in Ireland. Recently, there has been an increased appetite for commercial properties such as pubs, hotels, shopping centres, and retail outlets etc., all with an emphasis on income.
All costs incurred by the property purchase are met by your pension scheme – stamp duty, solicitor fees etc. There is no Capital Gains Tax on the sale of the property nor is there any income tax liability on rental income received. At retirement, the purchase property can be transferred in-specie to an Approved Retirement Fund (ARF). No stamp duty will be incurred on the transfer and all rental income will continue to be paid to the ARF.
Revenue has set guidelines and restrictions on what Property purchases are permitted through self-administered pension schemes. Restrictions include purchases being on an arm’s length basis from the beneficial owner of the pension scheme and the rules also prohibit property purchases with the view to development and immediate disposal. The purchase of holiday homes is permitted so long as neither the beneficial owner nor any connected party uses the property. Borrowing with the pension fund is also restricted.
Direct property purchase via a self-administered pension plan gives you the opportunity to use your pension fund to secure long term income and an asset that should provide tax free capital appreciation so you can enjoy the fruits of your labour in your retirement.