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Many self-employed people have self-administered pensions set up through various Banks or Trustee Companies.  It is still open to the owners of these Self-Administered Pension Schemes to use the pension funds to purchase properties.  It is possible that the Government may move to change the rules governing the operation of such pension schemes to make it less attractive tax wise for pension schemes to purchase residential property.  The fund can purchase the property or can raise a mortgage to assist in the purchase of the property.

There are strict rules governing the transactions;

  • It must be an arm’s length transaction (i.e. you cannot buy the property from a connected party and you cannot rent it to a connected party).
  • The property being purchased cannot be purchased for the purposes of development.
  • Aside from the fact that your pension will probably not have to raise a loan to buy the property there are many other tax reasons why you would use your pension fund to purchase a property. There is no Income Tax payable or PRSI or USC on rental income from the letting of the property.  Furthermore, there is no Capital Gains Tax liability on the disposal of the property held in the pension fund.

You can purchase residential or commercial property through the self-administered pension.  It is critical that you contact your Pension Fund regarding the purchase of the property in order to see how much of the fund is available to utilise in the purchase of the property.  The Pension Fund will take a cautious approach to the purchase and will emphasise the importance of good quality properties located in good areas where there is a good rental demand.

The legal costs associated with the purchase are paid by the Pension Fund and likewise if there are refurbishment costs these can be covered by the Fund.