9 Benefits of Using Your Pension to Buy Property in Ireland

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Investing your pension fund in property represents a unique financial opportunity, enabling wealth accumulation and the growth of your pension fund. 

This avenue has captured the interest of investors who recognise the potential benefits of leveraging pension funds for property acquisition.

Explore the compelling benefits of using your pension for property investment if you seek to improve and secure your financial future.

Tax-Free Rental Income

One of the most enticing benefits of property investment is that rental income is not subject to income tax. 

This means you get to enjoy the profits without extra taxes, making the property more profitable overall.

The money made from renting out your property goes back into the pension fund. This helps the fund grow consistently and gives you a reliable income that can be used for more investments or during retirement.

Generate Income Post-Retirement

Investing your pension in property provides the opportunity to generate ongoing income through rental payments. 

This steady stream of income can be crucial for maintaining your lifestyle and covering expenses during retirement.

No Capital Gains Tax on Sale

Another advantage is that you don’t have to pay Capital Gains Tax (CGT) on the eventual sale of the property. 

This means that when you sell your property, there is no Capital Gains Tax (CGT) on the increase in value. This is different from the 33% CGT imposed on the capital appreciation of properties owned personally.

This way, you can potentially accumulate wealth without losing a significant amount of money to taxes. 

Property Acquisition Expenses Included

When you use your pension fund to buy property, it covers all the related costs, like stamp duty, solicitor fees, and other expenses.

This not only simplifies the process of owning property, but it also guarantees adherence to Revenue rules to ensure everything is done correctly.

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Flexibility in Investment Strategy

Using your pension to buy property offers flexibility in your investment strategy.

It allows you to diversify your retirement portfolio, potentially enhancing overall returns. 

This flexibility is particularly valuable as it enables you to adapt your strategies based on market conditions and personal financial goals.

Transfer to Approved Retirement Fund (ARF)

At retirement, you have the option to transfer the property “in specie” to an Approved Retirement Fund (ARF)

This flexibility allows you to maintain the property within a tax-efficient structure, potentially deferring taxes on income tax until funds are withdrawn from the ARF.

Choice of Property Type

With property investment, you can choose the type of property that aligns with your preferences and financial objectives. 

You have the flexibility to choose the property you want to buy using your pension. Whether it’s a residential, commercial, or industrial property, or a combination of these, you can hold them within the fund.

Financing Your Pension-Backed Property Acquisition

Borrowing against your pension funds to finance a property purchase, offers the advantage of controlling a larger asset with the potential for higher returns on investment. However, it also comes with increased investment risk.

A liquidity rule mandates maintaining 10% of the net asset value plus costs in cash within your pension fund. This is necessary because property is not easily converted to cash, and having funds on hand is essential to cover fees and costs.

It’s important to know that whether you can use borrowed money to invest in property depends on the type of pension plan you have. Different pension plans come with distinct rules and regulations governing the use of pension funds.

Talking to our financial advisors at True Wealth can help you thoroughly understand if using borrowed funds fits well with your overall investment plan.

Legacy Planning

Investing in property through your pension allows you to create a tangible legacy for future generations. 

You can pass down real estate assets to your heirs, providing them with a valuable inheritance. 

This can be a powerful component of your overall estate planning strategy, ensuring that your hard-earned wealth continues to benefit your family well into the future.

Get Retirement and Pension Planning with True Wealth

Planning for retirement involves careful consideration and strategic decision-making, and managing your pension can be a nuanced task. 

True Wealth offers a distinctive approach by introducing the option to invest your pension fund in property. This avenue opens up a unique financial opportunity, allowing for the accumulation of wealth and the growth of your pension fund. 

By leveraging the potential of property investment, True Wealth aims to enhance the effectiveness of your retirement and pension strategies, ensuring a secure and prosperous financial future.

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All our content has been written or overseen by a qualified financial advisor. However, you should always seek individual financial advice for your unique circumstances.

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