Thursday, July 7, 2016

State pensions and qualified adults

I am retiring from work when I turn 66 and will be eligible for a reduced-rate State Pension (Contributory) of €198.60. My husband is getting his full State Pension (Contributory) of €233. He thinks we would be better off if he claimed for me as a qualified adult on his pension. Is he correct? If we do this, will all the money be paid to him?

If your husband claims for you as a qualified adult on his pension, then his pension will consist of €233 plus an increase of €209 – a total of €442. The increase is automatically paid directly to you (although you can request that it is paid with your husband’s pension). If you decide to claim a reduced rate contributory pension then the total for you both will be €431.60. Therefore, it would appear that you are indeed better off being a qualified adult.

However, there are other factors that you should take into account. While your husband’s pension is not means tested, the Increase for a Qualified Adult is means tested. This means that any income you have in your own right from employment, self-employment, savings, investments and capital (for example, any property except your own home) is taken into account. If you have joint savings or investments with your spouse, half is taken into account.

You also need to look at the tax situation. Your husband is entitled to claim a PAYE tax credit (€1,650) with his pension. Even though the Increase for a Qualified Adult is paid directly to you it is not a social welfare payment to you so you cannot claim a PAYE tax credit of €1,650. However if you claim a social welfare payment in your own right (for example, your reduced-rate pension) you can claim a full PAYE tax credit.   

You should analyse both options carefully and do detailed calculations, taking all the factors that affect how much you receive into account. After you do the calculations, you may find that you are better off claiming the reduced-rate contributory pension in your own right. 

No comments:

Post a Comment