Dominic Coyle answers your personal finance queries

Wedding worry over properties

My partner and I are getting married in one month. We both have separate mortgages on our homes. Once we are married and she lives with me, will we be liable for capital gains tax if we decide to sell her house in a few years from now? If so, is their anything we can do before we get married to avoid this payment now and in the future?

Mr DC Dublin

At the moment, the situation is straightforward. You each, as single people, have a principal private residence on which you would have no capital gains tax liability if you were to decide to sell.

As you suspect, that will change once you marry. At that point, you will be treated as one family unit and will own two properties. In those circumstances, one of the properties will be treated as a principal private residence and the other as an investment property.

Should you subsequently decide to sell your fiancee's house, you would be liable to capital gains tax.

This is generally levied on the increase in value of the property between the time of its purchase and its sale - with the impact of inflation allowed for up to the end of 2002 under a Revenue indexation formula.

However, you would only be liable for capital gains on part of the sale price. When you sell a property that has been a principal private residence for at least part of its ownership, you calculate CGT only on that portion of the ownership that represents the period when it was not your main home.

Is there a way around capital gains in your case?

Not really, unless you sell the property in the near future - although you will have longer than the next month, which is a good thing given the list of things on any pre-wedding to-do list.

The capital gains tax rules decree that the final year of ownership of a private residence is considered as a period of owner occupation even if the owner has not physically lived in the property during that time.

As such, you effectively have the whole of the first year following your wedding to arrange the sale of the property without exposing your fiancee to capital gains tax.

Pension fund

I am a 55 year old in the process of being made redundant after 25 years working for a multinational company and am very concerned over the best course of action to take with regard to my pension fund.

I am the only person in my fund, which is a defined benefit fund with a transfer value of €1.2 million.

I have a number of questions that I would appreciate if you could advise me on.

If I was to remain in the fund, could the company place someone else in the fund and then when I reach 65 I would find that my pension was underfunded?

If the company was to close its Irish subsidiary (for whom I work), what would happen to my pension fund? I understand that PRSAs are not an option for me and that I will have to purchase a buy-out bond?

What is my best course of action? How do I ensure that I get the best deal from the insurance companies in purchasing the bond?

Ms SS, e-mail

It may not be the comprehensive answer you wish to hear but the information you seek will be determined largely by the nature of the rules of the pension fund itself.

Your situation is not exactly run-of-the-mill in that you are the sole member of your defined benefit scheme.

You would need to check the scheme rules, which must be made available to you either by the company or the trustees of the scheme to determine whether any other employee of the company could join that fund following your departure or whether the fund would simply be frozen or wound up.

The one thing on which I would be pretty categorical is that any decision to permit entry to the fund by another employee should in no way affect your pension at 65.

This is a defined benefit scheme and, in those circumstances, any underfunding is a problem for the company and not for you.

A more significant issue is whether the fund could be closed - either now or if the multinational should choose to close its Irish operation. Again, the conditions under which the fund can be closed will be laid out in the scheme rules.

If the company was to close the fund, the options are basically threefold:

n transfer the fund to your new employer, if applicable;

n transfer the fund to a PRSA;

n purchase a buy-out bond.

You say you have been told that PRSAs are not an option for you although I am not sure why.

Be that as it may, the advantage of a buy-out bond over a transfer to a new employer is that you retain greater control over the investment choices of your pension fund, which, in any event, is likely to be a defined contribution model at that stage rather than your existing defined benefit one.

Getting the best deal from insurance companies is largely down to shopping around and assessing the performance of the various providers.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 10-16 D'Olier Street, Dublin 2 or by e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.