Time and time again I see people asking about Self Administered pension schemes, and can’t quite put my finger on why that is.
 
Is it do with the Irish obsession with property? Is it because Self-Administered Pension fund providers excel in marketing to their target market? Is it because property prices and rents have been increasing over the past few years?

 

I don’t know the answer but I think it is appropriate to double down on our view here in Metis Ireland around buying property through your pension fund. I believe I am well placed to offer a balanced view as I still hold the property through my pension fund that I referenced back in 2015. For the record, I still wish I didn’t have it!

 

I read an interesting article by Ben Carlson on “Real Estate” investing for US investors. It’s a short and worthwhile read, and I was particularly taken by this line:
 
“If you do it as a hobby you will most likely fail because there are professionals who know far more than you do.”

 

Here’s some of the reasons we are sticking with our view that most people should not set up a Self-Administered Pension Scheme for the purposes of buying a property:

 

  • Costs – stamp duty, legal fees and pension fees mean that the yield you might have thought you were going to get doesn’t work out especially in the early part of the investment
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  • Diversification – you can quite easily and relatively cost effectively invest in a global investment strategy through your pension fund. The “great value” property deal that you come across has a habit of turning pear shaped (refer my purchase in 2007)
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  • Exit Strategy – what happens when you want to retire? Do you sell the property? Will it be the right time? What about liquidity for your tax-free lump sum? I have a saying that I always use with clients – if you need cash, you can’t sell a window out of a house!
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    Our existing clients know that we have three key pillars that we always look to when creating an investment portfolio (either inside or outside a pension fund):

     

  • Diversification
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  • Cost Efficiency
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  • Tax efficiency

  • In most cases we have examined, property investment through Self-Administered Pension Funds cannot tick all of these boxes.

     

    There’s a much bigger picture here though. Does your Financial Plan indicate that property investment is a good idea for you and your family in the long term? This has to be the first step! You need a long-term financial plan. In the absence of a long-term financial plan, you are punting in the dark. You are (like me in 2007) hoping that your investment strategy works out.

     

    Don’t be me in 2007 – engage an expert financial planning firm and get yourself a financial plan that then guides your investment decisions. We call it the Metis LifePlan.

     

    There are only a few firms in Ireland doing this level of planning properly. Find one of them, engage with them and I am pretty sure you will never “punt in the dark” again.

     

    Carl Widger
    Co-Founder & Director

    Disclaimer


    Metis Ireland Financial Planning Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland.


    All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified independent financial adviser before entering any financial contract. Metis Ireland Financial Planning Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.