Pension vs property in Ireland: which option provides the better retirement income?

The pensions versus property debate in Ireland is not just a question of preference. It is a question of net, after tax, after cost income that you can rely on in your 60s and beyond. With the State Pension now at €289.30 a week for the maximum contributory rate in 2025, that is roughly €15,100 a year. For most households this is a useful floor, not a full retirement. The heavy lifting usually has to come from private savings and investment choices you make in your 30s, 40s and 50s.

Auto enrolment will begin on 1 January 2026. Employer contributions and a State top up will nudge non‑members into saving. If you already have a pension scheme, the question becomes how much extra to contribute and whether a buy to let should sit alongside it. The answer is rarely all or nothing. It is about the numbers, the risk and the time you want to spend managing assets.

Executive summary

For most Irish workers, additional pension contributions will usually beat a leveraged buy to let on a like‑for‑like basis once you account for Income Tax relief on contributions, tax free growth in the fund and structured drawdown rules. Buy to let can still work in specific niches where the yield is strong, leverage is modest and management is efficient. In practice, a blended plan is common. Your home provides security, pensions do most of the income work, and any direct property exposure is sized prudently.

How Irish pensions stack up

Pensions get three powerful tailwinds. First, you receive Income Tax relief at your marginal rate on contributions, within age related limits and the annual earnings cap for relief. For example, a higher‑rate taxpayer contributing €1,000 effectively invests €1,000 at a net cost of €600. Second, growth inside the pension is not taxed while it remains in the wrapper. That means dividends and gains compound without annual leakage. Third, retirement gives you options. You can take a tax free lump sum within lifetime limits, then choose an annuity or keep the fund invested in an Approved Retirement Fund and draw an income.

There are rules that matter for cash‑flow planning. From the year you turn 61, ARFs are subject to an imputed minimum withdrawal of 4 percent a year, rising to 5 percent from age 71. Withdrawals are taxable under Income Tax and USC, but the big driver is what happens to the fund before then. A well diversified portfolio capturing global equity and bond returns has historically compounded faster than the net cash yield from a mortgaged rental once costs and tax are included.

A few anchor statistics help frame expectations. The maximum State Pension contributory rate is €289.30 per week in 2025. The age related contribution relief limits range from 15 percent of earnings when under 30 to 40 percent at age 60 and over, subject to the annual earnings cap for relief. Auto enrolment will start in 2026 and is set to include matching from employers and a State credit, making the decision to participate straightforward for anyone not already in a good scheme.

How Irish buy to let stacks up

Property is tangible and it can produce both rent and capital growth. The reality behind the headlines is that returns are very sensitive to financing costs, regulation and maintenance. Typical advertised buy to let rates in mid 2025 sit in the mid‑5 percents for 60 to 70 percent loan to value mortgages. The national rental market remains tight. Daft reported a 7.3 percent year on year rise in open‑market rents to March 2025, and just over 2,300 homes available to rent on 1 May. Dublin rents rose by 2.4 percent in the first quarter of 2025, the largest quarterly rise there in more than two years.

Regulation shapes cash flows. In Rent Pressure Zones, annual rent increases for sitting tenants are capped at the lower of general inflation or 2 percent. Mortgage interest is deductible against rental income when the tenancy is registered with the RTB. A small landlord rental income relief applies to qualifying landlords. On the cost side, stamp duty on a second‑hand residential purchase is 1 percent up to €1 million and 2 percent on the portion above that, with legal, survey and upgrade costs on top. Local Property Tax, letting and management fees, RTB registration, insurance, repairs and voids further reduce net yield.

Two numbers explain why many investors have found the last few years tough. Gross yields that look acceptable on paper compress quickly after allowing for ongoing costs that often total 20 to 30 percent of rent before tax. Interest bill changes of even 1 percentage point can push a geared rental from small surplus to small deficit in a year. That is before any larger capex such as a replacement boiler or energy upgrade.

A worked Irish example

Here is a stylised comparison. It is not advice. Your numbers will differ and should be modelled before you commit.

Assuming You have €100,000 available today:

• Pension route: You contribute €100,000 gross via AVCs or a PRSA and receive 40 percent relief, so your net outlay is €60,000. The fund compounds at 5 percent a year before charges. At retirement, you take a 25 percent lump sum within lifetime limits and draw 4 percent a year thereafter.
• Property route: You use the €100,000 as deposit and purchase costs for a €300,000 buy to let. Mortgage of 70 percent loan to value at 5.55 percent. Gross yield 6.25 percent. Ongoing costs equal 25 percent of rent. Rent growth follows RPZ (rent pressure zone) rules for a sitting tenant. Long‑run price growth of 2 percent a year, but also test zero.

What the maths tends to show

Because every euro into the pension received tax relief on the way in and compounded without annual tax, the pension pot often outpaces the mortgaged rental on an after tax, after cost basis. Even after you pay Income Tax and USC on withdrawals later, the internal compounding advantage can outweigh the property’s thinner net yield. The property case improves if you buy exceptionally well, keep leverage low, self manage and sustain a higher net yield. That mix exists, but it is rare and it takes time and skill.

Tax and rules snapshot to frame your plan

Think of the State Pension as the base layer that will cover a portion of essential spending. The maximum contributory rate is €289.30 per week in 2025, and there are transition rules for those reaching pension age in 2025. Auto enrolment begins in 2026, with employer matching and a State credit that make non‑participation costly for many employees. Pension contributions get Income Tax relief at your marginal rate within age related limits that rise with age, up to 40 percent of earnings for those aged 60 or over, subject to the annual earnings cap for relief.

For landlords, the taxation headline is simple. Net rental profit is charged to Income Tax at 20 or 40 percent plus USC and, depending on age and circumstances, PRSI. Mortgage interest is deductible for registered tenancies. The Residential Premises Rental Income Relief is worth up to €800 in 2025, rising to €1,000 in 2026, subject to conditions and focused on Income Tax only. Stamp duty on most second‑hand residential purchases is 1 percent up to €1 million, then 2 percent on the slice above. Rent increases for sitting tenants in RPZs are capped at the lower of general inflation or 2 percent a year.

Who should favour which?

Pension heavy makes sense if you are on the higher rate of tax, have employer matching, value simplicity and prefer diversified exposure with minimal admin. A targeted buy to let can add value for investors who can keep leverage modest, buy at fair yields in areas with resilient demand, and either self manage well or hire a trusted agent whose fees are built into the numbers. Many households will do both in sequence. They maximise matched pension contributions first, reduce their own mortgage, then add carefully sized property exposure once liquidity buffers are in place.

Practical checklist

• Maximise any employer match. It is free money.
• Use AVCs or a PRSA to bring you up to your age related relief limit each year if cash flow allows.
• Stress test any rental for a two month vacancy, a 2 percentage point interest rate rise, a €3,000 repair and rent capped for two years.
• Work in the Residential Premises Rental Income Relief if you qualify, but do not rely on it to make a weak deal work.
• Diversify so that one property does not dominate your retirement plan.
• Keep liquidity for rainy days. Property is lumpy and slow to sell.

Bottom line and next step

In Ireland today, pensions usually provide the cleaner and more reliable route to retirement income for most people. Direct buy to let can still play a role where the net yield is genuinely robust and the risks are actively managed. The right answer depends on your tax rate, time, temperament and tolerance for admin. If you want a personalised model using your age, earnings, tax rate and target retirement income, contact F J Hanly & Associates to build the numbers and design a blended plan that fits you.