A guide to investing in property through your pension in Ireland

A guide to investing in property through your pension in Ireland

By: Damien
19 Jul, 2022
Many people are keen to invest in property in Ireland by using their pension, but how do you do it and what are the pitfalls to avoid? Our guide tells you.

For many people looking to make an investment for the future, property is an attractive option. In the past decade, residential property prices have consistently risen across Ireland – recovering from a low in 2012 – and are now back to levels not seen since the height of the ‘Celtic Tiger’ boom in 2007.

Residential property prices in Ireland are now averaging about €280,000, although this does vary markedly across the country, from about €130,000 to €600,000.

But with no sign of a collapse in prices on the horizon, many people see property as a solid investment that can provide returns either in the short-term as rentals and in the longer-term when a property is eventually sold for a profit. Although, of course, all investments come with a degree of risk that should be acknowledged from the outset.

With the capital outlay to buy property being significant for many people, it is unsurprising that some look to use their pension pot to do this, and it is becoming an increasingly popular option.

But how do you go about making such an investment, what are the rules around it and how can you ensure any investment has the best chance of making the returns you desire?

Using your pension fund to buy property

You can use your pension to buy property, but there are certain restrictions on what can be used. For instance, you cannot use your pension to buy property if it is part of an occupational pension scheme.

The types of pensions that are commonly used to buy property are Approved Retirement Funds, Personal Retirement Bonds, Personal Retirement Savings Accounts and Small Self-Administered Schemes.

But in the latter case, along with single-person schemes, there is a European Union directive called, catchily, IORP II, which impacts what assets they can hold. If your pension is this type, it is advisable to seek professional advice, such as from Malone and Co, who are experts in pension funds and the investments that can be made with them.

How a pension can be used to buy property

While there isn’t a generic process of buying a property through a pension, there are certain steps which are common in the process. This includes sourcing a property, ensuring you have the necessary funds in your pension to cover the purchase, organising funds to be transferred to the relevant bank account and dealing with all the legal matters that a property purchase involves.

Types of pensions that can be used

As mentioned, there are four main types of pension fund that can be used to buy property.

Small Self-Administered Schemes have the benefit that a holder can determine how much is contributed to it and what it is invested in – subject to certain restrictions. There are also other flexibilities to it including that regular contributions do not have to be made, unlike some other pensions, which is why business owners and directors often choose this option.

But it should be noted that under IORP II only half of the value of the fund can be used to invest in property.

Meanwhile, an Approved Retirement Fund gives investors a range of options for investment once they have retired, such as shares, bonds and property.

Again, there are certain restrictions on their use for buying property. One significant restriction is that a certain percentage of the fund – usually up to 10% – must be retained as liquidity, which can be used to cover things like expenses. This has to be factored in when looking at properties to invest in, especially in more expensive areas of the country.

Another pension scheme option is the Personal Retirement Savings Account. This is a fund used to save for retirement, either through regular contributions or occasional lump sums, which makes them popular with many people.

Finally, there is Personal Retirement Bond, which is a vehicle a person can transfer their pension pot into when they exit a company-run pension scheme.

There are numerous benefits of buying property through a pension scheme, and many allow you to invest directly in property, be it commercial or residential, and you can also seek out the properties you want to invest in. Maintenance costs can also be paid for out of the pension fund.

In financial terms, in some cases, you can borrow a proportion of the purchase price – but advice will need to be taken before doing this. Also, costs that come with buying a property, such as stamp duty, are absorbed by the fund. And, when the property produces income, it is not subject to income tax.

There are also benefits further down the line – if you sell the property, it is not subject to Capital Gains Tax.


Of course, there are various costs involved with purchasing a property, which have to be factored into any decisions. These typically include legal fees, insurance, fees charged by letting agents and any local property taxes.

It is also advisable to retain a level of liquidity in the pension pot to ensure any maintenance costs are covered or if there is no rental income being made.

But, as ever, there are certain rules about using a pension to buy property that all buyers should be aware of.

For example, the property cannot be lived in by the owner, nor rented out to a family member; the owner must remain at arm’s length. If it is found that a person closely connected to you is living in the property, it is viewed as a distribution from the pension and will therefore be taxed. In addition, a property cannot be purchased to be a holiday home for your own

Another rule is that a property cannot be bought with the aim of developing it and selling it on. Related to this, any work that is done at the property has to be done by someone unconnected to the owner.

If the property is being rented out, the income from that has to be paid into a bank account that is associated with the pension scheme.

Buying a property overseas is allowed in certain circumstances. One of the stipulations if this avenue is pursuing is that arrangements are made that ensure a trustee maintains control of the property.

Get advice

As this guide shows, using your pension to invest in property in Ireland can be financially rewarding, but it is also a complex process, so it is advisable to get advice from professionals who are experts in these types of investments.

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