Step by Step Guide to Pension Property Purchase and Borrowing

“Are you interested in investing in property through your pension but don’t have enough funds in your scheme? The solution could be a loan within your pension, but how does it work?”

Step 1: Set up a self-administered scheme and PRSAs and Buy Out Bonds are eligible for pension property investment and borrowing. 

Step 2: Select the property you wish to purchase through your Pension Scheme and consider the level of borrowings needed to complete the purchase. 

Step 3: Arrange Mortgage finance.

Step 4: Set up an Exempt Unit Trust to hold the property and the mortgage liability. The Unit Trust will be the borrower for the purposes of the bank’s loan documentation and, the Pension Scheme Provider and Bank instruct separate solicitors to liaise with each other to arrange the drawdown of the loan and perfection of the security.

Step 5: Finally, a Bank Account is opened to receive rent payments and make mortgage repayments. 

Some Revenue Rules:

• Only purchased properties may be used as security
• The borrowing is non-recourse to other assets in the pension scheme
• All loans must be repaid in full before retirement
• Loans can be for no longer than 15 years

Source: Fiona Harris, ITC, 20th Of March 2024.

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