Buying investment property with buy out bond

M

mcivor1

Registered User
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3
Hi,

I am 52 years old and a member of DC pension scheme in my current employment.

I have buy out bond value €100K from previous employment. Is it possible to use this buy out bond to purchase an investment property to form part of my future pension and provide investment diversification. If so what restrictions would apply. If I were to purchase a property for say up to €200K, what options would I have to fund the balance of €100K. Could I fund this balance using cash savings if available, or could I get some type of pension mortgage

Thanks in advance

mcivor
 
The best way to do it is to transfer your retained benefits into the main scheme and buy it through there as you need the contributions to pay the mortgage. I doubt your employer would allow that though.


The mortgage would have to be paid off by retirement too.


From the information provided, it doesn't look like a runner to me.


Steven
www.bluewaterfp.ie
 
Hi Steven,

Many thks for your reply.

Could I in theory access my buy out bond as I am over 50, and use this bond to say purchase an investment property for €100K i.e. same value as buy out bond.

To purchase a property over this value it looks as though I would in effect have to retire and gain access to additional funds from DC fund or get agreement from current employer to access DC fund for this purpose - this agreement is unlikely and not sure I would want to do this.

Otherwise I would be unable to supplement purchase of investment property with cash savings or mortgage

Is this correct

Rgds,

mcivor
 
If you matured your bond, it would be split into two:

1. Your tax free lump sum - this is your cash and you can do whatever you want with it.
2. The remainder stays in pensions world, be it in an annuity or an ARF. You can draw it down but you have to pay PAYE and you have to satisfy the AMRF requirements. As you are still working, drawing down the full amount will be taxed at 52%.

Why don't you buy some dividend paying equities with it instead? Easy to do, no landlord headaches or repairs, liquid asset so you can sell whenever you want, no borrowings.


Steven
www.bluewaterfp.ie
 
Hi Steven,

The buy out bond is currently invested in exempt IL consensus fund. My current DC fund is also invested in various equity funds. My thinking was that I could diversify my overall pension by switching all of the bond from IL consensus fund into an investment property which would remain ringfenced as part of pensionworld. It looks like this isn't an option

Thks again

mcivor
 
I would argue that property isn't really much of a diversification from equities. They are strongly correlated and both go up and down at the same time.

The Consensus fund is a diversified fund and invests in a range of different asset classes already, although its equity exposure can get a bit high in my opinion.


Steven
www.bluewaterfp.ie
 
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