Dáil Éireann debate -
Wednesday, 4 Feb 1998

Vol. 486 No. 4

Written Answers. - Social Welfare Benefits.

Michael Bell

Question:

43 Mr. Bell asked the Minister for Social, Community and Family Affairs the proposals, if any, he has to utilise actual market interest rates rather than arbitrary interest rates when making an assesment of savings as part of a means test; and if he will make a statement on the matter. [2671/98]

Minister for Social, Community and Family Affairs (Mr. D. Ahern)

The means tests used in determining entitlement to all social assistance payments include an assessment of the value of any capital or investments which the applicant may have. As there are over 470,000 people in receipt of social assistance payments it would not be feasible to assess means from capital on the basis of actual returns from investments as this would necessitate frequent reviews of the entitlements of a very significant number of recipients whenever interest rates fluctuated. For this reason a notional value is ascribed to the capital owned.

Recently the process of standardising the assessment of capital across the different social assistance schemes has been initiated, so as to improve the equity of the system. Under the new assessment provisions, the first £2,000 of capital is disregarded, the next £20,000 is assessed at 7.5 per cent of the capital value and the balance is assessed at 15 per cent. The Social Welfare Act, 1997 provided for a further extension of the revised capital assessment provisions to the old age (non-contributory) pension, widow's and widower's (non-contributory) pension, orphan's (non-contributory) pension, carer's allowance and pre-retirement allowance schemes, with effect from 17 October 1997.

The revised capital assessment provisions are of benefit to the majority of social assistance recipients who have capital. For example, a single old age pensioner can now have capital of up to £6,160 and still qualify for the maximum rate of old age (non-contributory) pension — an increase of £3,173 on the previous arrangements. A married couple can have capital of up to £12,320 and still qualify for the maximum pension — an increase of £6,345. A single pensioner can have up to £37,150 from June 1998 and still qualify for the minimum rate of pension, while a married couple can have up to £74,300 before losing entitlement to the pension.

In addition, the effective assessment rates of capital have been lowered for most recipients with capital. For example, under the former arrangements the effective assessment rate for all levels of capital for old age (non-contributory) pension purposes were approximately 10 per cent in the case of a single people and 5 per cent for a married couple. Under the new procedures, capital of up to £20,000 is now assessed progressively up to a rate of 6.75 per cent in the case of a single pensioner and up to a rate of 3 per cent in the case of a married pensioner couple. As only about 2 per cent of single old age pensioners and 4 per cent of married pensioners have capital in excess of £20,000, the new arrangements have improved the income position of the vast majority of old age pensioners.