Self directed Pension Property

[50thbirthday]

Hi all,
Can someone advise the next steps with regard to my pension. I have a self directed pension which consists of a single apartment in Dublin, no borrowings, value 350k. Rental is 1800per month. No loans, cash is rent account 60k. I can select to retire at 50. How do I use this rental income after I select to retire???

W

 

[Dave Vanian]

Lots of questions...

What type of pension is it? Occupational Pension Scheme, PRSA, Buy-Out Bond, Personal Pension?

Are you retiring from work at 50? Are you finishing work at that age?

It is possible to set up an Approved Retirement Fund (ARF) and transfer the apartment into it. You can make withdrawals from the ARF, which will be taxable. The rent goes in; the withdrawals (after ARF expenses) come out.

Whether or not such a course of action is advisable for you would be a question for your broker who set up the self-administered pension for you.

 

[Steven Barrett]

First of all, you won't be able to maximise the tax free lump sum entitlement as you don't have enough cash to pay out the 25% tax free lump sum.

As for using the rental income as retirement income., you just transfer the property from a self directed pension to a self directed ARF and draw down the rental income as personal income. It is taxed as income. The pension company that manages your pension will run the payroll for you each month.


Steven
www.bluewaterfp.ie

 

[Conan]

But you must have sufficient liquidity to pay a minimum drawdown of 4% pa.

 

[Dave Vanian]

But you must have sufficient liquidity to pay a minimum drawdown of 4% pa.

As that requirement only kicks in from the year the OP turns 61 and they're asking about retirement at 50, in theory they could accumulate the rent for 10 years or more with no drawdown. But I'm not sure what it is that they're trying to achieve from the information posted. Maybe they need the income to live on; maybe they don't.

In any event, if the ARF contains little more than the €350,000 apartment, then a 4% drawdown would be around €14,000 per year. Rental income is currently €21,600 per year so even with a 4% drawdown, liquidity should be improving as times goes on.