Case study

Quantity surveyor Donn O'Shaughnessy has bought two apartments in the Beacon South Quarter development in Sandyford using his pension fund.

The leveraged investment, which he made using Standard Life's Synergy pension product, is timed to coincide with O'Shaughnessy's expected retirement age of 60.

O'Shaughnessy will pay off his 15-year mortgage through a combination of rental income and additional voluntary contributions (AVCs) to the pension fund.

"The rental income will be around €15,000 a year. My estimated AVC top-up to repay the mortgage is about €20,000 a year," he says.

For O'Shaughnessy, the benefits of the arrangement are clear: "The beauty is that it's all tax-free money. The rental income is tax-free and the balance you pay each year is also tax-free."

Another advantage is that Standard Life will handle "the nitty-gritty", as O'Shaughnessy puts it, including the fit-out and the rental of the property.

"It's completely hands-off from investors' point of view in terms of the snag lists, surveyors and renting, although they do run the quotes by you."

O'Shaughnessy views rental properties as a way to diversify his pension investments. He also contributes to a company pension fund which is invested predominantly in equities.

One of the downsides of the Standard Life scheme is that he found he had to put down 25 per cent of the purchase price as a deposit. "That's a lot of cash to need upfront," he says.

The mortgage could also only be linked to the initial purchase price, rather than the new, higher value of the property at the time of closing, he notes. "It is a slight straitjacket."

There is naturally less flexibility in investing in a property through a pension than there is in direct property investment - if investors move to sell the property, the money remains in the pension fund until they retire. But, for O'Shaughnessy and many others, it is all worth it for the sake of the tax relief.