Dáil Éireann debate -
Wednesday, 7 Jul 1993

Vol. 433 No. 6

Written Answers. - Exchange Rate Losses.

Edward Nealon

Question:

71 Mr. Nealon asked the Minister for Social Welfare if his attention has been drawn to the fact that following the recent adverse fluctuations in the sterling/punt exchange rates, major losses were caused in the income of Irish residents with British social welfare pensions augmented with Irish social welfare pensions, that the new exchange rate applicable from April 1993 is £1 sterling equal to 0.937841 punts and that this in no way compensates these categories of pensioners for the loss sustained in the period October to April; if he will take steps to ensure that adequate compensation is provided in these exceptional circumstances which are quite obviously not covered by the practice of his Department in using the standard exchange rate mechanism employed within the EC; and if he will make a statement on the matter.

Minister for Social Welfare (Dr. Woods)

People who are in receipt of a British pension may also be entitled to a non-contributory pension from my Department. However, the UK pension must be taken into account as means for the purpose of determining their entitlement to the Irish pension.

The means assessment for non-contributory pensioners disregards the first £6 in weekly means and thereafter the means are in effect assessed in £2 bands. Accordingly people who have a British pension assessed as means and who receive a reduced rate non-contributory pension receive in aggregate more than a person who has no means. The banding arrangements also ensures that small adjustments in weekly means do not typically require an immediate and corresponding change in the rate of non-contributory pension payable. The general £6 disregard is a concession which ensures that there is no inequitable treatment in these cases when they are compared with the majority of pensioners.

When calculating means for non-contributory pension purposes, British pensioners' Sterling income must be converted to Irish Punts. Even within the EC Exchange Rate Mechanism, there are frequent and sometimes wide fluctuations in EC exchange rates. It would not be practicable to frequently recalculate pensioners' means based upon the rate of exchange prevailing at any point in time.

In order to reflect a reasonable pattern of exchange rates, an average exchange rate system is used for converting EC pensions to Irish Punts. For this purpose, my Department uses figures which are provided by the Administrative Commission of European Communities on Social Security and Migrant Workers. These average exchange rates for each EC currency are published quarterly by the Commission in the Official Journal of the European Community.

The average exchange rate system used gives an important degree of security to people who qualify for a non-contributory pension from my Department by protecting them to a large extent from short term movements in exchange rates.

A review of old age pensioners receiving British Pensions was initiated in 1991. This review established that 87 per cent of these pensioners had received increases in their other incomes. In many of these cases the rates of Old Age Pension payable had therefore to be reduced. Because of the age of many of the pensioners no action was taken to recover the amounts overpaid which in many cases would have represented a considerable amount for the people concerned.

Increases of 4.1 per cent and 3.6 per cent in British Pensions took effect in April 1992 and April 1993 respectively. These increases have not been assessed yet in the bulk of these cases. If these increases had been immediately assessed, many pensioners would have had their entitlements reduced in April 1992 and again in April 1993.

The fact that the Department does not immediately readjust entitlements with effect from the date of increases in British Pensions is an important and sympathetic concession. Changes in the system to keep means assessments fully up-to-date would worsen the overall circumstances of the people concerned. In the vast majority of cases the non-retrospective adjustment of pensions being applied results in more favourable treatment for pensioners than a retrospective approach.

For all of the above reasons, my Department does not intend to compensate pensioners retrospectively to cover recent adverse fluctuations in exchange rates. However, it is open to Old Age Pensioners to apply for a means review at any time where they have reason to believe that their assessments should be reduced.