In part 1 of this blog, we discussed what is pension property, why consider it, why now and what are the benefits. If you have yet to read part 1, please click here.
5. What are the rules?
- The sole purpose of the investment must be to provide benefits on retirement. It cannot be used for any other purpose.
- The property purchased through a pension must be at ‘Arm’s Length’. Meaning the pension cannot buy or sell property from you, your employer or anyone connected with you.
- You cannot use the property for yourself, as personal use is prohibited.
- Pension schemes are not permitted to trade.
- The development of a property with a view to selling it is not allowed.
6. Potential costs associated when purchasing a pension property?
When purchasing a property through your pension, you should consider some of the potential costs. These can include:
- Stamp duty
- Solicitor fees
- Local property tax
- Letting agent fees
- Service charges
These costs will vary depending on the type of property you purchase.
7. What pension schemes are eligible?
In ITC you can currently purchase property through:
- Approved Retirements Funds (ARFs)
- Personal Retirement Savings Accounts (PRSAs)
- Buy out Bonds (BOBs)
- Or a combination of the above
Can borrowing be used?
Borrowing can be used, however, it is not permitted for ARFs. The ITC PRSA and ITC BOB can avail of borrowing, allowing our clients to enter into investment opportunities that might not have been available otherwise. Here are some of the key rules:
- No recourse to other assets
- Interest only loans are not permitted
- No loan terms over 15 years
- No assignment of rental income.
- The loan must be paid in full before retirement.
If you are thinking of investing in property through a pension, please contact your financial advisor or email email@example.com.
*Please note this content is the view of the author and not of Independent Trustee Company