A few weeks ago, I wrote about self directed pensions and how they differ from the typical pension that you take out with an insurance company. One of the big differences is the greater freedom of investment choice. You are not restricted to the suite of funds that are offered by an insurance company. However, people being people, some will try to look at ways to manipulate the tax free pension environment to their advantage, so the Revenue have laid down rules about investments through self directed pensions.
Investments
Investments must be at arm’s length. That means your self directed pension cannot buy shares from you or anyone connected to you. Likewise, the pension scheme cannot sell shares directly to you. They must be bought or sold on the open market.
The self directed pension cannot loan to any members of the scheme or anyone having any interest in the scheme.
Property
The vendor is at arm’s length from both the scheme and the employer. A common request is can I transfer my investment property from my own name into my pension fund. It is a very clear, no you can’t.
The disposal of the property must be at arm’s length too. So you cannot sell the property to yourself, the employer scheme or anyone connected to you.
You cannot rent the property to your business or yourself or family. Again, this is a common request. Someone wants to buy a property and rent it out to their kids. Again, this is not allowed.
You are allowed to purchase overseas property as long as the pensioneer trustee can maintain control of the asset to ensure Revenue rules are complied with.
A transaction which involves the trustees directly buying and developing property with a view to then selling it is not allowed.
Pensioneer Trustee
For small self administered pension schemes (company paid self directed pensions) a pensioneer trustee must be appointed. Their role is to act as a watchdog for the Revenue. One of their duties is not to allow any investments that are contrary to Revenue rules and they must report directly to the Revenue and actions that they find do break these rules. As the Pensioneer Trustee has to sign off on any investments that are made, do not expect to be able to make any investments that fall foul of Revenue rules.
