state pension & rent allowance

LegacyUser

Neighbour is renting a house to some of her friends. They want to apply for rent allowance but she is afraid this could affect her state pension.

Any advice or help would be welcome.

mrsbyrne

unregistered wrote: »

Neighbour is renting a house to some of her friends. They want to apply for rent allowance but she is afraid this could affect her state pension.

Any advice or help would be welcome.

It depends on whether her state pension is contributory or non-contributory.

LegacyUser

mrsbyrne wrote: »

It depends on whether her state pension is contributory or non-contributory.

Non-contributory. How does this make a difference?

mp22

unregistered wrote: »

Non-contributory. How does this make a difference?

Non-contributory pensions are means tested http://www.citizensinformation.ie/en/social_welfare/social_welfare_payments/older_and_retired_people/state_pension_non_contributory.html

The_Conductor

unregistered wrote: »

Neighbour is renting a house to some of her friends. They want to apply for rent allowance but she is afraid this could affect her state pension.

Any advice or help would be welcome.

The first EUR30 a week in rental income she gets is disregarded as 'means' for the purpose of calculating the relevant non-contributory OAP. After the first EUR30 a week- there is a reciprochal reduction in non-contributory OAP entitlements.

For example:

Mary is currently claiming a non-contributory Old Age Pension and has been assessed as entitled to €219.00 per week.

Mary proposes to rent out her house and has been advised she will receive €1000 a month in rental income.

This rental income breaks down roughly to €250 a week (give or take). The first €30 of this is disregarded as means- bringing it down to €220 means assessed income. The €220 is greater than the €219.00 she is currently getting as a non-contributory OAP- her entitlement to a non-contributory OAP ceases, as her means exceed the limits imposed.

Change the figures somewhat.

Mary instead rents her house out for €500 per month.
This breaks down to approx. €125 a week.
The first €30 of this is disregarded- leaving her with a means tested income of €95 a week. Her non-contributory OAP of €219.00 a week is then reduced by the €95 a week, leaving her with a revised entitled of €124 a week

If Mary's pension is a contributory pension based on her stamps, the pension is not reduced by other means.

In both instances, Mary is expected to declare the additional income, and pay any relevant taxes on it (possibly no tax depending on her allowances etc). She is also expected to register the tenancy with the PRTB and comply with all the obligations of the 2004 Residential Tenancies Act.........

wellieboot

A second home is treated differently. The rental income is NOT taken into account. It's the capital value. If the second home has already been declared, whether rented or not, it will make no difference to their payment, as it would have been taken into account in the initial means test.

http://www.citizensinformation.ie/en/social_welfare/irish_social_welfare_system/means_test_for_social_welfare_payments/means_test.html#lba223


Capital and property not personally used

Capital includes property (excluding your own home), savings and investments. If you own property that you are not personally using or you have investments or any other form of capital, the value is assessed, using a standard formula. You may or may not be getting an income from the property or investment.

The property and investments that may be assessed under this heading include savings in a bank account (or anywhere else), a house that you have let and stocks and shares. If you or your spouse or partner saves a portion of your social welfare payment each week, these savings as well as savings from most other sources will be taken into account as part of your means.

The standard formula for assessing the value for all social welfare payments (except Disability Allowance and Supplementary Welfare Allowance) is as follows:
Capital

Weekly means assessed
First €20,000 Nil
Next €10,000 €1 per €1,000
Next €10,000 €2 per €1,000
Balance €4 per €1,000
More information is available in our document on Capital and social welfare payments.

The_Conductor

wellieboot wrote: »

A second home is treated differently. The rental income is NOT taken into account. It's the capital value. If the second home has already been declared, whether rented or not, it will make no difference to their payment, as it would have been taken into account in the initial means test.

http://www.citizensinformation.ie/en/social_welfare/irish_social_welfare_system/means_test_for_social_welfare_payments/means_test.html#lba223


Capital and property not personally used

Capital includes property (excluding your own home), savings and investments. If you own property that you are not personally using or you have investments or any other form of capital, the value is assessed, using a standard formula. You may or may not be getting an income from the property or investment.

The property and investments that may be assessed under this heading include savings in a bank account (or anywhere else), a house that you have let and stocks and shares. If you or your spouse or partner saves a portion of your social welfare payment each week, these savings as well as savings from most other sources will be taken into account as part of your means.

The standard formula for assessing the value for all social welfare payments (except Disability Allowance and Supplementary Welfare Allowance) is as follows:
Capital

Weekly means assessed
First €20,000 Nil
Next €10,000 €1 per €1,000
Next €10,000 €2 per €1,000
Balance €4 per €1,000
More information is available in our document on Capital and social welfare payments.

I thought it was optional to count the income generated by the property- or to use the Capital means calculation......?

In the case of a house thats rented out, with a nominal value of 150k (which seems reasonable enough)

First 20k exempt
Next 10k, EUR1 per 1k (=income/means of 10)
Next 10k, EUR2 per 1k (=income/means of 20)
The rest EUR4, per 1k (= income/means 440)

Total means considered to be 470 per week. 30 of this is disregarded. The remaining 440 a week is far higher than the non-contributory pension of €219 a week- so they get nada.........

?

wellieboot

There's no discretion in how the 2nd property is treated afaik.

If the pensioner is part of a couple, the disregards are doubled up.

The_Conductor

wellieboot wrote: »

There's no discretion in how the 2nd property is treated afaik.

If the pensioner is part of a couple, the disregards are doubled up.

Not if its a non-contributory pension and a supplement is being claimed for a dependent adult- the disregards remain constant, however the net reckonable pension is the gross of the two payments- which allows a higher secondary income without wiping out the non-contributory OAP or the supplementary pension (as quickly).

To be honest- the OP needs to sit down with the hard information- possibly in the citizen's advice bureau, and they should go through the various options with them (because we're both speculating about things here- we don't even know that its a second property for example, its entirely possible its their sole property (even if they're not living in it)- which means there would also be a non-domiciliary pension involved- but we just don't know the various ins and outs.........