Self Administered Fund - Buy Leaseback

N

noelc

Registered User
Messages
27
Can anyone advise if a self administered pension is allowed to purchase a leaseback type property in an overseas location?

I have €40k sitting in a fund that I would like to take more control of.

Ideally, I would like to transfer this €40k to a self administered fund and use it as a deposit to purchase an overseas leaseback type property. The plan is that the leaseback would require no further financing as the rental income would cover the borrowings. There are a few questions, though...

Do revenue allow purchase of overseas leaseback properties by self administered funds?

If the self administered fund needs to borrow to finance the investment - can it?

Apologies if I am asking questions already answered on the forum.
 
This will not work because:
  • Under Revenue rules the purchase of a holiday home is not permitted by a self administered scheme
  • The purchase of overseas property (not holiday home) will only be permitted where the Pensioneer Trustee has control of the assets to ensure Revenue rules are complied with (no personal use)
  • The maximum loan period for pensions borrowing is 15 years
  • The purchase of an overseas property by an Irish Trust (a Pension Plan) may not result in the rental income being tax free. Not all European countries recognise the tax status of an Irish pension.
There is no problem however with you purchasing the property personally (on an interest only loan basis) and using the pension fund as the repayment vehicle i.e. a Pension Mortgage.
 
I think it could work, because:

  • A leaseback may include a condition of "no personal use"
  • The borrowing period can be less than 15 years (provided the pension fund has sufficient funds built up)
  • You would probably need to set-up a company in the overseas country - that company would buy the property...the pension trust would "own" that company which in turn would own the proeprty
  • It certainly is more complicated and more expensive than buying an Irish/UK property through the trust
 
To set-up a SART would usually cost in the region of €5k.

Admin would cost about €2k.

If it bought property outside UK/Ireland, then revenue approval and structure of trust etc may be more complicated.
In such a case, these costs may be on the optimistic side, they may be higher than this.
 
If €40K is the sum total of what is in the pension fund, I think that the OP should not even consider this type of venture unless they have a whole pile of other assets to fall back on.
 
It depends on the fund size that the pension holder will accumulate in to the future.

For example, if an investor is planning to invest €40k + on an annual basis in to the future...then, in such a case, the fund could quickly exceed €400k...in which case the self-admin option becomes a suitable choice.
 
Buying property overseas may require the establishment of a Company to hold the property. Yes this adds to the cost and complication.
However if that company then buys a "holiday property" it is questionable whether this gets round the Revenue regulations. The Revenue have said that they will "look through" such structures and may withdraw approval if the Revenue rules are breached.
I would not advise such a strategy without getting Revenue clearance in advance (though I know some operators take a more "aggressive" view).
 
I would definitely not recommend an "aggressive" approach.

Holiday property is completely prohibited.

However, "Leaseback" does not equal "Holiday", in my opinion.
 
Thanks for the reply and discussion.

I appreciate that €40k is not a large amount. This is from a previous employment when I was PAYE and has been sitting idle for sometime. I have not added to this fund since finishing this PAYE position and am not a company director of my own company.

This is not my main pension. I just wanted to take control of the €40k (currently with Mercer) and use it to buy an overseas leaseback type property with no personal usage.

The main reason I am asking is because I believe that if the Irish revenue do not approve of the transaction that I am entitled (under European legislation) to transfer the pension fund to a more lenient EU regime, for example a UK SIPP and then purchase the leaseback property through this vehicle.

Does anyone have any views on this? I would [prefer to keep the business in Ireland.
 
Maybe I am confusing the issue with my ramblings. From what I have read on this forum taking out a self administered fund would seem to (a) be a relatively expensive process and (b) only for those with large funds

All I want to do is the following:

1. Take personal control of the current €40k fund
2. Use this fund as deposit payment to purchase an overseas leaseback prop. paying 4-5% per annum
3. Have the rental imcome from the leaseback property repay the mortgage over a 20 year term
4. Top up the fund from time to time if rental income not sufficient to repay mortgage
5. Then when I am at approved retirement age sell the property and benefit from the proceeds

Is this a reasonable plan? At the moment I feel that the €40k pension fund is under the control of others and I do not have any control or say in what it is invested in. If I invest it in the purchase of a self financing leaseback property at least I can see the asset that the fund will own at the end of the 20 year mortgage term when I will be at retirement age.
 
You need to come up with 25% of purchase price.

It will be 'relatively' expensive to run a self-admin fund if you plan to purchase a property for 'only' €160k.
 
You must log in or register to reply here.
Back
Top