Major boost for Irish investors as French leasback properties become pensionable

Ireland• Secure leaseback investment offers strong income stream in retirement
• Any income generated by the pension is tax-free
• No capital gains tax payable after 15 years

For the first time, Irish investors can place French leaseback properties into their pensions, whether small self-administered schemes, PRSAs (personal retirement savings accounts), Approved Retirement Funds, or company, executive and personal pension plans.

This significant new development brings considerable tax advantages to an already secure, long-term retirement planning product. For many Irish investors, it will be a welcome alternative to volatile stockmarket investments and increasingly expensive annuities.

Crucially, any income generated from French leaseback is tax-free while capital gains tax is not payable in Ireland (or France after 15 years). This is in addition to the already attractive tax benefits of French leaseback, such as a pre-financed VAT rebate of up to 19.6% and, in certain cases, French Government subsidies.

This ground-breaking investment opportunity for Irish investors has been jointly implemented by Dublin-based Pierre & Vacances Property Investments and the Independent Trustee Company, one of Ireland’s largest pension trustee companies.

In France, leaseback properties have been open to pension investors since the 1960s but differences in the law made it difficult for Irish pensions to invest in them. However, ITC and Pierre & Vacances Property Investments have managed to overcome this issue and can now open this rapidly growing market to Irish pensions as well.
Stockmarket-listed Pierre & Vacances is France’s leading development and tourism company with over seven million clients and an annual turnover of €1.5bn. Its conservative business model, operating in the historically stable French property market, offers a safe source of long-term guaranteed rental income.

Investors may even choose to part-finance their leaseback property, which could be a cottage in the latest Center Parcs development, an apartment in Paris or a chalet in the Alpine ski resort of Avoriaz. Mortgage finance is available from a number of French banks. Where bank borrowing is provided, rent can be taken tax-free for the majority of the investment term.

Due to the stable cash flow of the model, the loan is paid back by Normal Retirement Age, at which point the rental income becomes the investor’s retirement income through the ARF regime. In effect, the rental income services the loan pre-retirement and the investor post-retirement.

Crucially, the price paid by the investor for this income is only a fraction of what a comparable annuity purchase would cost. Should the investor need a lump sum, the property may, of course, be sold.
Pierre & Vacances Property Investments is currently offering leaseback properties across France for prices ranging from €100k to €1m and with guaranteed rental income up to 4.5% index-linked, net of all charges and running costs.There are different options to suit different budgets and investment needs:

• Purchase the entire property using pension funds
• Joint purchase, buying with another person’s pension fund
• Putting in the minimum amount from your pension fund and financing the rest with a French mortgage available comp rates

Clients need to have a financial adviser and to transfer their existing pension to ITC in order to take advantage of this opportunity.
Niamh Erbek, Business Manager (Ireland), P&V Property Investments, comments: “Interest in investing in French leaseback property to secure income for retirement has grown exponentially in the current risk-averse climate.

“Guaranteed rental income for the duration of the lease is very appealing at present, especially when it can be used to meet or offset any mortgage payments. The fact that there are no management or maintenance hassles and no running or insurance costs offers additional peace of mind.

“Many investors are between a rock and a hard place right now and have significant capital sums tied up in poorly performing pensions that default into expensive annuity products. They are desperate for secure investment products that generate solid income streams and P&V leaseback properties are exactly that.”

Tommy Nielsen, director, Independent Trustee Company, adds: “P&V leaseback property becoming pensionable is a highly significant development for Irish investors. A secure, long-term investment vehicle that already has favourable tax incentives has now been bolstered by the tax-free structure of the pension.

“Low risk, highly tax-efficient investment products like this that come with the certainty of a long-term guaranteed rental income are proving very attractive to a growing number of investors, especially given the volatility of equity markets over the past two years and decreasing annuity rates.

“Leaseback experienced a setback a few years ago when unsustainably high rental returns brought a management company down. But to us P&V are the epitome of stability and offer absolute certainty of rental income.”

Robert Forman, founder and QFA, Dublin-based wealth adviser, Dominium Wealth Creation, concludes: “Our clients are looking for security with a decent chance of capital gain. 27-year leases, the reassurance that you are dealing with a solid PLC and competitive guaranteed rents combine to make P&V leaseback properties very attractive at this time for retirement planning purposes.

“The response from clients has been phenomenal. It is the right product at the right time with the timeless qualities of security and value.”

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  1. Robert Slyne | May 30, 2011 | Reply

    I have just seen this article on the and am very intereste dto find out if it can help my situation. I already own a P&V sale and leaseback 1 bedroom apartment in Paris (Cote Seine) – I also have a 2nd non P&V property. I have recently been caught with substantial Irish Revenue tax bills – e.g. my cash flow in France is about a negative €5k and yet I ma faced with a 2010 tax bill of a further c.€7k because the Irish Revenue do not recognise the depreciation allowance in France. Can you advise ? Can I sell and reenter as a Pension Mortgage ? Other than the French properties, I am a PAYE earner with I think a fairly maxed out company pension scheme … Please advise. I rang about a separate query recently but this article was interesting.

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