Anyway to access pension fund before retiring

[onekeano]

Myself and a colleague are mid 50's and have c.500k each in pension funds between AVCs and regular contributions. With annuities paying around €3k per 100k the outlook is not too good these days .

We work for a large multinational and don't intend retiring for another 7/8 years or so.

We're toying with the idea that a commercial property would provide a better income stream if we bought it over 10 years (or less).

Two questions arise a) is there any way to unlock a portion of our pension pots? and b) any idea what kind of equity we would require when purchasing a commercial property ie. 20% / 30% etc?

Any advice would be much appreciated.

Roy

 

[Steven Barrett]

A few things:

You are not restricted to purchasing an annuity at retirement. You can transfer the fund to an ARF and continue to invest the money, so annuity rates may not be relevant.
To access your pension fund early, you must have left the company. If you intend to carry on working for them and want to purchase a property, you can ask them to set up a self administered pension plan for you. If it is a large company pension plan, it is unlikely that they will set up a completely separate plan for one or two employees.

It is extremely difficult to get a mortgage for a property through a pension. You will need blue chip tenants and even still, it is still difficult to get a loan. You can expect to get no more than 50% LTV. Another consideration is that the self admin plan will be in your employer's name for your benefit. If you default on the loan, they will be the ones getting the hassle. Do you think they will take that on?

With a relatively short investment term to retirement, you should be cautious about investing a large chunk of your money into commercial property. Property is an illiquid asset and when it falls, it can take a long time to recover.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[onekeano]

Hi Steven - thank you very much for the feedback although it does makes pretty glum reading to be honest .

"you can ask them to set up a self administered pension plan for you. If it is a large company pension plan, it is unlikely that they will set up a completely separate plan for one or two employees.....Another consideration is that the self admin plan will be in your employer's name for your benefit. If you default on the loan, they will be the ones getting the hassle. Do you think they will take that on? " - spot on here.....it's probably the most bureaucratic company in the world and there would be 1 million reasons why they wouldn't do that I'm sure.

I was looking at a building hosting a well known and thriving retail store which I know very well selling for around 800k with a yield of 12% with > 10 years left on lease, and looking for a mortgage of <10 years.

I understand your point regarding liquidity, between us we have a couple of buy to lets with a good bit of equity (not 400k tho.....), I suppose an option would be to sell these rather than take cash out of a pension.

Having an income of 45k each on top of the pension was particularly appealing in the above scenario .

Roy