Life Home & Garden

Tuesday 20 August 2019

Home Economics: Our property finance expert answers your questions


Sinead Ryan
Sinead Ryan
Sinead Ryan

Sinead Ryan

Q: I've been paying into my pension for 20 years now, and have been somewhat disappointed with the results, despite a good mix of equity, property and bonds. I am interested in investing directly in property and understand I can do this via my pension by buying directly with the fund. Can you outline how to go about it and how the tax element works.

A: Eve Nolan from Independent Trustee Company says: "There are a number of self-administered pension structures available on the market which allow you to purchase property through your pension, depending on your employment and retirement status.

One of the most notable benefits of investing in property through your pension are the tax advantages. Initially, you may receive tax relief on any contributions made to your scheme, within certain limits. Once you have purchased a property through your pension scheme, any rental income received, less expenses and/or liquidity requirements, can be channelled back into the pension scheme with no Irish income tax liability. These funds can then be reinvested within your pension fund. Any returns on these investments in Ireland will also be tax-free. If, at any stage, you do decide to sell your property, there will be no Capital Gains Tax liability applied to any gain made on the sale. Once established, you can transfer in existing benefits to fund the property purchase. In the case of the SSAS and PRSA, you can also make further contributions to the scheme if required. If it is not feasible to fund the property purchase solely through your pension scheme, there are alternative options available via mortgages (up to 50pc LTV typically).

"Generally an individual trust is established for each property purchase, which segregates the property asset from other assets within your pension, meaning creditors will only have recourse over the asset held within the trust. Another benefit of holding your assets in a separate trust is that it provides full visibility and transparency of transactions and activity on the property account."

It is also possible to carry your pension property investment into retirement, which allows your property investment to continue, while drawing a pension income.

Strict new EU laws - the IORP 2 directive - which were due to be enacted earlier this year will create a high level of governance and risk management controls to these schemes. There is kick-back from the industry against the directive, but Minister Regina Doherty seems resolute on applying it.

Q: My boyfriend and I want to rent our first apartment but we plan to move abroad in 2020. The lease says that if we break the contract before a year, we will be obliged to pay rent until the new tenant can be found and to pay for advertising of the apartment. This is a big thing for us as we're trying to save money and may have to go if our visas arrive earlier than expected. What can we do?

A: Generally, you can only terminate a fixed term lease where either you or the landlord has breached an obligation under the law; the landlord doesn't consent to sub-letting to finish out the lease or the lease provides specific grounds for termination before the end of the term in compliance with the Residential Tenancies Act, says the Residential Tenancies Board.

The landlord is permitted to mitigate their loss by attempting to re-let if you break the contract and is entitled to deduct re-letting fees along with lost rent from your deposit. Otherwise rent is due for the full term of the lease. If the property is re-let, then he can only claim for the loss of rent up to that point.

I'd be honest and upfront about it and be prepared to fork out if you choose to travel early.

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The Ryan Review

ECB President Mario Draghi (the fella that autographs your bank notes) personifies the "You Only Had One Job" theory. The ECBs key remit is to maintain inflation at 2pc. It uses monetary policy to do this, usually by manipulating interest rates. It's safe to say it has been a miserable failure.

The last time it steadied at 2pc for any sustained period was in 2007. It's currently at 1.72pc which has resulted in interest rates of zero for years. Banks are free to borrow for, eh, free.

This of course is reasonably good news for borrowers and last month's policy review was meant to signal a rate hike would be pushed out until the middle of 2020 at the earliest.

However, Draghi went further. Clear intent of more rate cuts (further into negative territory) and a ramping up of bond buying sent the Euro plummeting against the dollar, cut bond yields again and, in the only entertaining news, annoyed Donald Trump, who accused Draghi of currency manipulation (as if that isn't his job) and competing against the USA (as if that is).

While the spat continues, expect more fixed rate mortgage offers, ongoing pain for savers and an 'Irish' inflation rate at odds, yet again, with the EU.

Sinead presents 'The Home Show' on Newstalk 106FM on Saturdays at 9am.

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