PRACTICAL
CASE STUDIES
FIND OUT HOW YOU COULD INVEST IN PROPERTY THROUGH YOUR PENSION
FIND OUT HOW YOU COULD INVEST IN PROPERTY THROUGH YOUR PENSION
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* Contributed to a company pension fund for 13 years – €150K value of the fund.
* She wants to use her pension fund to buy property and has even selected the house she likes, which is valued at €210,000.
* Now needs to establish a self-administered pension scheme if she wants to purchase a property using her old pension.
* Has two options – Establish a PRSA or a self-administered Buy-Out-Bond (or Personal Retirement Bond).
* A Buy-Out-Bond holds a member’s pension proceeds from an occupational scheme, where the member has left service or the scheme has wound up.
* A PRSA can accept transfers from occupational schemes provided the member has less than 15 years pensionable service with the sponsoring employer.
* €60K + costs needed to purchase a property.
* Pension lending is being granted on a case by case basis. A maximum Loan to Value of 50% is allowable, and the loan must comprise of capital and interest repayments. Interest Only loans are not eligible.
* She wants to use her pension fund to buy property and has even selected the house she likes, which is valued at €210,000.
* Now needs to establish a self-administered pension scheme if she wants to purchase a property using her old pension.
* Has two options – Establish a PRSA or a self-administered Buy-Out-Bond (or Personal Retirement Bond).
* A Buy-Out-Bond holds a member’s pension proceeds from an occupational scheme, where the member has left service or the scheme has wound up.
* A PRSA can accept transfers from occupational schemes provided the member has less than 15 years pensionable service with the sponsoring employer.
* €60K + costs needed to purchase a property.
* Pension lending is being granted on a case by case basis. A maximum Loan to Value of 50% is allowable, and the loan must comprise of capital and interest repayments. Interest Only loans are not eligible.
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* Self-employed IT Consultant.
* She is 52 and has for 20 years, been contributing to a PRSA which is now worth €250,000.
* She also has a Buy-Out-Bond (or Personal Retirement Bond) from her time in employment with a previous employer, which is valued at €40,000. Karen is interested in purchasing a property worth €235,000 through her pension.
* The first step for Karen would be to transfer her existing pension schemes into a self-administered pension vehicle.
* A Buy-Out-Bond (BOB) cannot be transferred into a PRSA, so the schemes must remain separate.
* However, Karen can transfer both schemes into individual self-administered BOB and PRSA vehicles. Now that both schemes are with the same provider and self-administered, they can jointly invest in a property asset. A certain amount of the total value of each scheme must be retained in cash as liquidity, but the balance is available for investment. This remaining balance must be sufficient to cover the purchase price of the property and all costs and expenses associated with the purchase.
* She is 52 and has for 20 years, been contributing to a PRSA which is now worth €250,000.
* She also has a Buy-Out-Bond (or Personal Retirement Bond) from her time in employment with a previous employer, which is valued at €40,000. Karen is interested in purchasing a property worth €235,000 through her pension.
* The first step for Karen would be to transfer her existing pension schemes into a self-administered pension vehicle.
* A Buy-Out-Bond (BOB) cannot be transferred into a PRSA, so the schemes must remain separate.
* However, Karen can transfer both schemes into individual self-administered BOB and PRSA vehicles. Now that both schemes are with the same provider and self-administered, they can jointly invest in a property asset. A certain amount of the total value of each scheme must be retained in cash as liquidity, but the balance is available for investment. This remaining balance must be sufficient to cover the purchase price of the property and all costs and expenses associated with the purchase.
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* There is no transfer value available prior to retirement, only a pension in payment on retirement. If a civil service employee did wish to purchase property through a pension, they would need to establish and contribute to an additional pension fund (e.g. a PRSA). If a sufficient balance was accrued within this fund, it could be used to purchase property.
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Martin is 55 years old and owns his own company. He set this company up 25 years ago but has never contributed to a pension with his earnings. Can he avail of pension property?
* To avail of the benefits of pension property, Martin will first need to accrue a self-administered pension of sufficient value. As he is a company director, Martin can establish a SSAS.
* He can contribute a single premium lump sum to his SSAS.
* An actuarial calculation for max funding must be completed.
* This calculation takes into consideration a variety of factors, including years’ of service, salary, age, retirement ages, etc. For example, if Martin is married and on a salary of €50,000, he has the potential to contribute over €900,000 to his pension.
* Martin can now contribute a lump sum to his SSAS and proceed with purchasing a property through this self-administered pension scheme. The rental income of this property will flow back into his pension and build as a cash fund or can be drawn down and provide a steady income in retirement via his ARF and AMRF.
* To avail of the benefits of pension property, Martin will first need to accrue a self-administered pension of sufficient value. As he is a company director, Martin can establish a SSAS.
* He can contribute a single premium lump sum to his SSAS.
* An actuarial calculation for max funding must be completed.
* This calculation takes into consideration a variety of factors, including years’ of service, salary, age, retirement ages, etc. For example, if Martin is married and on a salary of €50,000, he has the potential to contribute over €900,000 to his pension.
* Martin can now contribute a lump sum to his SSAS and proceed with purchasing a property through this self-administered pension scheme. The rental income of this property will flow back into his pension and build as a cash fund or can be drawn down and provide a steady income in retirement via his ARF and AMRF.
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