Traditionally, most pension plans have invested in managed funds which pool investor’s monies and invest in shares, property, bonds and cash. Some clients, however, wish to have more control over their investment in terms of the assets their monies are invested in so Self-Directed Pensions were introduced to allow the client invest in property, shares, bonds or deposit accounts of their choice.
For example, a client could decide to invest their money in a pension fund which would, in turn, purchase a property by way of a combination of a deposit from the pension fund and a mortgage. The client makes their regular contribution to the pension plan to cover the cost of managing the property and the mortgage repayments. The rental income received will go into the pension fund.
All costs including stamp duty, conveyancing, property management costs, etc., are met by the pension fund, making purchasing and owning the property very tax efficient. There are, however, strict revenue guidelines around the purchase and the holding of a property within the pension fund.
Some clients who are already exposed to property may wish to use their pension fund to purchase shares of their choice. It is also possible for clients to invest their regular contributions into their pension fund and get a stockbroker to act on their behalf in terms or purchasing, holding and selling the shares, with transaction costs met by the pension fund.
Further information about the Self-Directed Pension options is available from the framework financial team.
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