# Non-Contributory Pension - Profit from house sale?



## Jsmarr (30 Jan 2011)

I posted over in the Mortgages part of the forum last week about uncle - Buying House Outright, but now it is more about the amount of money uncle can have left over from the sale of his own house and how it could affect his Non-Contributory Pension.

Uncle & his wife:
Uncle = Non-Contributory Pension.
His Wife = Contributory Pension.
Their own house = Jointly owned (Uncle and his wife)
Their own house = worth about €500k in this market.
The house uncle wants to buy = €200k

If their own house was sold for €500k and they buy the cheaper house for €200k, this would leave a profit of about €300k.
I have looked on the Revenue website and it says that if someone is on a Non-Contributory Pension, that the amount of profit allowed after the sale and purchase of another house is €190,500 of the €300k profit.

As the amount would be about €300k profit = €150k each to uncle and his wife, as their house is jointly owned.
Would uncle be able to keep his Non-Contributory Pension?


----------



## Ildánach (31 Jan 2011)

The following is from the Department's Operational Guidance Note http://www.welfare.ie/EN/OperationalGuidelines/Pages/spnc.aspx
It would seem that in the above circumstances, he would lose his non-contrib pension.  Although he could always go on his wife's contrib pension as qualified adult as long as he doesn't have his own income of greater than 300 euro/week.




> 4.1 If I qualify for pension, how much will I get?
> If you qualify for a State Pension (Non-Contributory), the pension will be made up of a personal rate for yourself and extra amounts for your dependents (see following paragraphs). The actual amount of your weekly personal rate of pension as well as the increase for your qualified adult and child/children will depend on the level of your means. Details are set out in the Rates of Payment Booklet SW19[/URL].
> A single person who has no other means can have capital of up to € 40,999 and qualify for the maximum rate of pension of € 219.00 per week. Alternatively, the same person can have capital as high as €93,999 and qualify for a reduced pension of €6.50 per week.
> A married or cohabiting couple who both satisfy the other conditions of the scheme and whose means are derived solely from capital can have joint capital of up to €81,999 and each can qualify for the maximum rate of pension of €219.00 per week. Alternatively, the same couple can have joint capital of up to €187,999 and each can qualify for a reduced pension of €6.50 per week.


----------



## Jsmarr (31 Jan 2011)

Thanks, thats interesting
Looking at the Revenue website and also the Welfare website it says - 

welfare.ie/EN/OperationalGuidelines/Pages/spnc.aspx#section3

*3.2 Exemption from means of the sale proceeds of your home*
''If you are living in accommodation which no longer suits you or which  you are no longer able to maintain, you may be able to sell your home  and move to more suitable accommodation without the sale proceeds  affecting your weekly means. The proceeds of the sale up to €190,500.00  may be disregarded when assessing your weekly means''.


Going by the above do it mean uncle could keep his Non-Contributory Pension and have €190,500 profit and wife could also have €190,500 profit each after the sale of their own house and purchase of a cheaper house?


----------



## Ildánach (1 Feb 2011)

No, that's not how it works, the 190,500 is disregarded from the profit of the sale. The remaining balance is then split between the two spouses/partners and assessed accordingly. On the figures provided your uncle would lose his non-contrib pension.

If your aunt was also on a non-contrib pension she could have the 190,500 disregarded in calculating her entitlement, but the disregard can only be used once in calculating any one pension.


----------



## Jsmarr (1 Feb 2011)

Uncle has Non-Contributary Pension,
His Wife has Contributary Pension.

If thats the case that the €190,500 is split between the two of them, could uncle use the Gift Tax - CAT 1 (revenue.ie/en/tax/cat/leaflets/cat1.html)
so could give the amount left over to relatives as a gift and retain his pension. Otherwise they might aswell not buy the cheaper house as uncle would lose pension, or buy a dearer house.

Could uncle use Gift Tax - CAT 1 and keep his pension?


----------



## Black Sheep (1 Feb 2011)

As wife is on a contributory pension there are no limits on the amount of income or savings she can have.


----------



## Jsmarr (2 Feb 2011)

Ildánach said:


> No, that's not how it works, the 190,500 is disregarded from the profit of the sale. The remaining balance is then split between the two spouses/partners and assessed accordingly. On the figures provided your uncle would lose his non-contrib pension.
> 
> If your aunt was also on a non-contrib pension she could have the 190,500 disregarded in calculating her entitlement, but the disregard can only be used once in calculating any one pension.



Aunt has a Contributory Pension, Uncle has the Non-Contributory Pension.

So if the €190,500 was disregarded in calculating uncle's entitlement, that would leave €109,500 (if profit was €300k) left over. Then the €109,500 is assessed as means for Uncle, which means he would lose his pension.

As the house is jointly owned and Aunt has the Contributory Pension, is this of any benefit to Uncle and his pension?
Or as I have read in another thread, could Uncle spend the €109,500 very quickly doing up the cheaper house and then keep his pension?


----------



## Ildánach (2 Feb 2011)

Jsmarr said:


> Aunt has a Contributory Pension, Uncle has the Non-Contributory Pension.
> 
> So if the €190,500 was disregarded in calculating uncle's entitlement, that would leave €109,500 (if profit was €300k) left over. Then the €109,500 is assessed as means for Uncle, which means he would lose his pension.
> 
> ...


 
The balance of 109,500 would be divided in two for the purposes of the means test, so if this was the only income that the couple had, then he would keep the non-contrib pension, although it would be significantly reduced.

But you also have to figure in the income of the aunt from the contrib pension. This is income and will be assessed against the uncle's non-contrib pension.

As for divesting himself of the income, reasonable expenditure is permitted. Something like doing up the house would probably be accepted, but if the Department take the view that the expenditure was not reasonable they can assess him on the basis that he still has the capital.

Don't forget that if the unlce does lose his non-contrib pension, or has it seriously reduced, that he can always go on to the aunt's contrib pension as a qualified adult (provided that he doesn't have his own earnings of more than 400 Euro per week).


----------



## Black Sheep (2 Feb 2011)

This is a bit confusing. The ruling states 190.000 of the *proceeds* (not the profits) of the sale will be disregarded. Therefore the profit of the sale to be assessed against non-con pension is half of 310,000 approx which would totally wipe out pension


----------



## Jsmarr (2 Feb 2011)

Black Sheep said:


> This is a bit confusing. The ruling states 190.000 of the *proceeds* (not the profits) of the sale will be disregarded. Therefore the profit of the sale to be assessed against non-con pension is half of 310,000 approx which would totally wipe out pension



Below is from the Welfare website: welfare.ie/EN/OperationalGuidelines/Pages/spnc.aspx#section3

*3.4 What happens if I buy more suitable accommodation?*
''If you buy more suitable accommodation, the balance of the proceeds  after buying the new accommodation is exempted up to a limit of  €190,500.00''.
*
Example*
''A person sells his/her house for €450,000 and buys alternative  accommodation for €200,000 leaving a balance of €250,000. For pension  purposes, a sum of €59,500.00 (i.e. €250,000 less €190,500.00) will be  assessed as means''.


----------



## Jsmarr (3 Feb 2011)

Ildánach said:


> The balance of 109,500 would be divided in two for the purposes of the means test, so if this was the only income that the couple had, then he would keep the non-contrib pension, although it would be significantly reduced.
> 
> But you also have to figure in the income of the aunt from the contrib pension. This is income and will be assessed against the uncle's non-contrib pension.
> 
> ...



Thanks for the replys.


Uncle and Aunt have no other income except for their pensions.

So it looks like it would be possible for uncle to keep his pension if he was to quickly spend half of the €109,500 doing up the cheaper house?


----------



## Black Sheep (3 Feb 2011)

My apologies jsmar. I stand corrected.

It appears therefore the uncle would be better off financially to become the qualified adult of his wife's pension as he would receive the full qualified adult rate assuming he has no other income


----------



## Jsmarr (4 Feb 2011)

Thanks Black Sheep.

Yes Uncle and Aunt have no other income, their only income is their pensions.

So Uncle's pension should be fine and he can always become a qualified adult of his wife's pension if need be.


Thanks again


----------

