6th April 2020
Should I buy property with a pension? Ever wonder what the pros and cons are if you did decide to establish a pension property? Is having a pension property a good idea? Hopefully this will help. In the short piece we will share:
Our love of property is widely recognised. Our general disdain of pensions is also widely recognised – maybe that’s why many of us have thought to buy property with a pension – if for no other reason than to sex-up the pension with some property! It’s not quite the golden ticket to Willy Wonka’s that many think it is – but there are merits for sure.
Instead of buying a property with your pension, you could consider buying units of a Property Fund (we wrote about this approach here – not ideal). In many ways an investor stands a better chance if they own bricks and mortar as opposed to units in a property fund, some of the reasons for which are outlined in Blog 135. There are certainly merits for owning property within a pension, if you insist, lets take a look.
Can I Buy Property With A Pension?
Before we get into the nitty-gritty, let’s consider how and if one can buy property with a pension. First things’ first; there is an EU Directive known as IORPS II due to come into force here in Ireland. This was actually due to be transposed into Irish Law a year ago, it has yet to be done, and heaven knows when it will happen now.
IORPS stands for Institutions for Occupational Retirement Provision. The intention with it is to standardise and ensure consistent compliance of pension funds across the EU. One of the impacts of this will be on single-person pension schemes, and Self-Administered pensions and whether such schemes can hold. There are reportedly over 100,000 such pension schemes in Ireland, so it is relevant to many individuals here. It could make it difficult to buy property with a pension in some scenarios. This would depend on the relative value of property to the pension, and whether it is before or after the individual has retired yet or not. More on the ins and outs in a coming episode.
The imposition to law has been fought tooth-and-nail, principally by the Association of Pension Trustees who have brought the case to the courts. Read more about it here on Pensions Authority website.
So yes, you can technically, at time of writing (April 2020) buy property with a pension. One thing you can’t do, before you ask, is to get your pension to buy a property you already own. If I had a euro for every time I’ve been asked if that was possible, I’d have at least enough to buy a pint of stout (when they re-open).
Pros – Buy Property With A Pension
Cons – Buy Property With A Pension
We’ll be sharing another piece in the near future to share with you the logistics, technical details around how it works, how the legals and the financials operate. Hopefully for now, this will help you determine for yourself if property really is the ‘Great Glass Elevator’ or if it is a bit of a Violet Beauregarde!
Speaking of Willy Wonka – as a bit of fun – first person to mail me with the correct name of the brand of the chocolate in the image in this piece will get their very own bar of said chocolate in the post from Informed Decisions HQ – It is almost Easter after-all!
Blog 135 – Are Irish Commercial Property Funds In Trouble?
Blog 33 – Is it Profitable Being A Landlord?
Blog 134 – 5 Signs You Need An Independent Financial Advisor
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