Here’s a quick recap of Paddy Delaney of Informed Decisions talk on buying property through your pension. Paddy has a number of blog posts and podcasts on this topic which delve into more detail, check out blog 141 here for more information.
1. You will need an executive or self administered pension to buy property through your pension. Paddy discusses this in more detail in this podcast with Tommy Nielsen of Independent Trustee Company here in podcast episode 177.
2. Anyone with a transferable pension sum can avail of it. You could be in a group scheme and take this lump sum and set up another pension buying a property through this.
3 The rent goes tax free into your pension pot.
4. This rent compounds without being taxed in your pension. (It’s only taxed when at the end of your pension you take out this money.).
5. It’s anonymous - it must be bought through a trust so if anonymity is important to you then this will be a bonus.
6. There’s no CGT on the gain within the fund.
7. Not diversified: Buying a house in Limerick for example is a lot less diversified than buying a global property fund or a basket of 100 world equities.
8. Illiquid - if you were to buy an ETF or most normal equities today and want to sell it tomorrow, bar some exceptional circumstance you should be able to. If you buy a house in Rathmines today, there’s no guarantee you’ll be able to sell in the next six months and in current circumstances even for the amount you bought it for.
9. Property you currently own: property you already own can't be brought into your pension.
10. Arms length - you can't just buy a property for your child for college and have it within your pension. The property must be managed at arms length.
I would highly recommend paying a visit to Paddy’s blog. If you are interested in property investing or property for your pension i think you’ll find the breakdown which Paddy does at the end of this blog particularly interesting. He works out how much you actually earn as the buyer of a typical buy to let property. However he also covers key questions to ask your financial adviser and a broad spectrum of investing topics throughout his blog and podcast.
As always I am just a novice investor and these are my rough notes, please do your own independent research and talk to your financial advisor before making any decisions.