Property is one of the safest investment prospects available, preparing you for a safer and brighter future, and crafting the best retirement plan for you that relies on tangible bricks and foundation.
Knowing how to utilize your pension fund in investment property builds long-term assets and guarantees your secure future, without any inherent risks associated.
Accessing your pension funds to help you cope financially can seem really appealing whenever you think of buying a second home or investing in some property to enhance your assets. Before taking decision, you need to be aware of all the risk factors involved.
Need of Property Investment
Prices of property are rising exponentially and there is a massive demand for property these days. Two essential factors behind choosing your pension investment in property include:
- Steady Asset Growth
- Higher Investment Yield
At times you might wonder if it’s worth buying extra properties. The major reason behind utilizing your pension fund in property investment is the income potential they offer.
Buying extra properties lets you experience a pleasant retirement fund over years. Basically, the idea is not to live in those houses, but to have such houses that bring you money instead!
Which Properties Can I Invest In?
Once you have decided to go for property investment with your pension, you think of the property types available for investment. A few of these include:
- Offices / Office Blocks
- Care Centers
- Medical Practices (Dental/ Physiotherapy etc.)
- Sporting Arenas
Perks of Investing in Property
- With the increasing property prices and long-term rental yields, buying an investment property can turn out to be fruitful, with a better tax efficiency. Unlike your personally-owned property, pension fund is always exempt from income and capital tax.
- Along with these tax-advantages, any amount that is paid alongside the pension for purchasing any tax-relief including auctioneer’s fees, stamp duty etc. is considered as a business expense, exempting it from national insurance and counting it as a tax deduction, and receiving tax-relief at a higher tax rate.
- You can acquire both residential and commercial properties, the choice is yours. The rental demand on residential property is quite strong these days, as well as the commercial property market is also picking up the prices higher.
- In case you are planning to sell the investment property in future, you don’t need to pay any capital gains tax.
- You have a better control than with traditional pensions, as you can decide when to sell the property or not.
- You can also pay the water charges and property tax directly through your pension fund.
You need to consider a few potential risks associated with property-investment via pension funds, and it’s a best approach to consult a financial advisor in order to fully understand the tax position and the potential fee impact. Let’s have a look at a few possible limitations:
- You need to have complete control over your pension so that you can have complete idea about what it is going to invest in.
- You need to have a self-administered pension to purchase both residential and commercial property.
- There are some cases when the trustees are not going to permit you to go on a solo run and buy property.
- Any property purchase linked with a beneficial owner is considered as a contribution from the pension arrangement.
- Any borrowing linked with property-purchasing complies with applicable revenue rules.
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