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Can you use your pension to invest in property? Yes – and it comes with plenty of benefits too:
Steady, long-term income
Dublin property values are on the uptrend, and so are the rent levels. House prices alone spiked 13% in 12 months according to Daft.ie’s Q2 2021 report. You can go with residential, commercial, industrial properties or a combination of the categories which are held in the syndicated funds.
Ring-fence your profits
- No tax on contributions
That way you have more funds to invest with as you choose your desired property.
- No tax on rental income
Meaning you get more bang for your buck.
- Want to sell? No capital gains tax too
When you choose to liquidate the pension property, the fund will not be required to pay the capital gains tax (CGT). How much are you saving? With the current CGT set at 33%, that's a lot of profits that you get to retain when the transaction is made.
Lump Sum upon retirement
Once you retire, you can take 25% of the pension funds value as a lump sum. Another tax benefit awaits here: €200,000 of this lump sum is not taxed.
Issues to take note of
What are the drawbacks? Like any other investment, there is a catch to it. With a relatively high sum required for the minimum entry-level, investing in it may require a significant chunk of your pension fund. The property also comes with operational costs such as insurance premiums and routine maintenance.
Finally, as is with all property investments, this is an illiquid asset, so you can't just wake up one random morning and expect a cash equivalent of the property value. However, given that it is in your pension and the fund cannot be accessed until you reach retirement, then, the property investment comes off as a lucrative and safer route to park your capital.