Using rental property as pension

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remey

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I'm not sure if there is a better place for this thread, please advise if so.
We have a rental property that we would like to be used for our pension. Neither of us have pensions worth talking about. We're currently in a 10 year contract with SDCC under the housing rental scheme.
The plan is to meet with the accountant, there is a 500 charge for him to prepare an advice pack and I want to make sure we've all our questions/queries ready.
I would appreciate any advice/heads up on what to query or any general feedback from having done it yourself?
Thanks
 
There is merit in having a diverse portfolio of assets in a "pension".

Clearly there are two ways of holding them:
1. Directly.
2. Through a pension wrapper.

1. Is not tax efficient at the start, you pay income tax on the income and capital gains tax on the profits as they arise. But that money is yours.
On the other hand if you decide you need cash you can liquidate your asset.

2. You get tax relief on contributions. The income and gains are not subject to tax within the fund but you have to pay tax at the end to get it out at 60+.

There are lots of threads on the returns on rental property and the tax that need to be paid. So if you make the call that an investment of say €200,000 yielding 6% in your own name can be managed with bank repayments and income tax payments over 20 years works for you then that's fine.

If on the other hand you think that putting away €1,000 per month (€600 cost after tax) is better then that's the call.
 
Its hard to call what the future holds but a property worth €200k would yield around €12,000 or 6%. A loan of €200,000 over 20 years would be €1,211 per month at 4%. So the rent over 20 years is €240k and the total repayments are €290k and the income tax is €85k so if everything stayed the same so it would cost you €135k .

But most people think that over the long term that prices rise. A 3% increase in values over 20 years would increase the value to €360,000 at 6% the annual rent is €21,600. Contribution from you around €100k.

How does that compare with a €5000 per annum net pension contribution. That's the question.
 
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