Lending in Pensions Attracting Investors
It is an interesting time for the property sector. We are currently dealing with the effects of the Covid 19 pandemic on our economy and investments as a whole.
Also, in April 2021, the IORP II Directive was implemented. This is an EU directive requiring pension schemes to take additional steps to improve governance, risk management, investment strategy and communications to members.
Purchasing property with lending:
Property investments by self-administered pensions have long been a specialty of ITC, and many of our clients have benefited from the strong yields generated by buying property with their pension funds. Some clients opt to use lending when purchasing such properties. This option can provide access to a property investment opportunities that might not otherwise be available.
The properties are purchased through ITC’s unit trust structure. This allows multiple pension schemes to buy one or more properties together.
Only Pre-Retirement Vehicles can take out lending. Due to the implementation of IORP II, PRSAs and BOBs are permitted to enter into lending arrangements. ITC can facilitate mortgages of up to 50% loan to value. These can be arranged by the pension member and their financial advisor.
ITC work with banking institutions to facilitate borrowing against property in pensions. As a result, a lending option for residential property was introduced by ICS Mortgages (Dilosk). Loans for commercial property are available through our other banking partners.
Pension borrowing is always granted on a limited recourse basis, meaning that the lender cannot pursue the assets of the trustees or the pension scheme member in the case of default. Only the property purchased can be used as a security. All loans must be repaid in full before retirement, with the maximum loan term being 15 years.
There is currently a high demand for rental properties. The tax benefits of purchasing property through your pension scheme are significant. Rental income on the property is not subject to Income Tax and no Capital Gains Tax is paid on any gain made if the property is sold.
In ITC, though we do not provide financial advice, we are always in favour of facilitating the widest possible choice of investments, provided that they comply within Revenue rules.
If you are interested in investing in property through a pension, contact your financial advisor or email email@example.com for more information.