Pension mortgages

O

onekeano

Guest
Have a small company which will turn in a profit this year. I'm wondering if the following is doable?

a) Can I divert say 10k into a pension mortgage via the company?
b) Can I buy a property in through the company ie. pay say 30k deposit and then fund the balance through a pension mortgage?
c) if the above are possible whho is the best finance house to facilitate same?

Thanks
Roy
 
Not sure you understand a "pension mortgage"

A pension mortgage is two sperate products

1. A pension ( most probably held with an insurance company e.g. Eagle Star, Irish Life etc )

2. A mortgage ( a loan from one of the banks/building societes ).

Most investors that use a pension mortgage, use as follows for e.g.

Joe buys a place for 100,000 but wants to utilise his pension to pay the capital element back.

Joe does the following
1. Pension - Takes out a pension with say Hibernian that will pay him at least €100K at retirement
2. Mortgage - Take out a mortgage with say AIB ( normally only paying the interest back ).

So at retirement Hibernian pays Joe €100K plus of which he passes on €100K to Hibernian.

Your situation is different however. You seem to want the company to buy the property. The problem that arises at retirement then is that the company owns the property and the associated debt. But you and not the company own the pension fund.
 
Not sure you understand a "pension mortgage"

Thanks for the feedback ALan. I take the point you are making regarding the company finally owning the property. Thinking about that it does not make sense alright.

What I was thinking about was a product like this ==>

[broken link removed]

So, if for example I make a profit of say 50k this year through the company, could I raise a mortgage to buy such a property in my own name, and in parallel set up pension contributions which would ultimately pay off the mortgage on the property.

If this was possible it would be a tax efficient way of extracting profits from the company in the same way as using AVC contribnutions to reduce the tax on company profits.

Any further advice appreiciated,

Roy
 
Re: Not sure you understand a "pension mortgage"

The investorfirst option is slightly differently in that your pension scheme ( through ILAC with ITC acting as trustees I assume ) buys the property ( using a loan from IIB ). Worth noting that the property belongs to the pension scheme and you are completely "at arms lenght" which suits a lot of people.

However, most pension mortgages are where Joe Bloggs buys the property, uses as they see fit and uses the proceeds of the pension to pay off the capital on retirement.

So in answer to your questions:

1. So, if for example I make a profit of say 50k this year through the company, could I raise a mortgage to buy such a property in my own name, and in parallel set up pension contributions which would ultimately pay off the mortgage on the property

Yep, as long as the bank is happy to give you the loan on this basis. They tend to scrutinise these a bit more than normal, as the pension element is un-assignable.

2. If this was possible it would be a tax efficient way of extracting profits from the company in the same way as using AVC contribnutions to reduce the tax on company profits.

Yep, its exactly the same principal. And under the present tax regime, the interest can be offset against the rental income. As you are not paying any capital back the interest is not reducing ( all things being equal ).
 
...

Alan, thank you very much for the feedback. I very much appreiciate it.
 
Maximum pension contributions from own company

Could anyone please advise what the maximum contributions are that can be made from a small company to one or more of its directors? For example an employee aged between 40-50 can put 25% of salary into a pension but what about a company director?

Roy
 
Re: Maximum pension contributions from own company

The total contribution which can be invested is dependant of a number of issues:
Current salary
Current age
Planned retirement age

Assuming you wish to fund for Revenue maximum benefits, it is possible to invest significant annual contributions. For example, if you are aged 45 now and plan to retire at age 60, it would be possible to invest circa 90% of salary per annum (inclusive of any personal contributions)
Any Company contribution is fully tax deductible as a trading expense against Corporation Tax and is NOT taxed as a benefit-in-kind in the hands of the employee/director.
 
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