Dáil Éireann debate -
Wednesday, 7 Oct 1998

Vol. 494 No. 5

Written Answers. - Pension Provisions.

Paul McGrath

Question:

63 Mr. McGrath asked the Minister for Social, Community and Family Affairs the plans, if any, he has to review the method of assessing moneys for pensions purposes in view of the low level of interest available on capital. [18690/98]

Breeda Moynihan-Cronin

Question:

125 Mrs. B. Moynihan-Cronin asked the Minister for Social, Community and Family Affairs the proposals, if any, he has in the 1998 budget to ease the means test for pensioners applying for old age pensions and if he will make a statement on the matter. [18814/98]

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

I propose to take Questions Nos. 63 and 125 together.

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 472,000 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.

Over the years different methods of assessing the value of capital have been applied to the various social assistance schemes. However, more recently the process of standardising the assessment of capital across the different social assistance schemes has been initiated, so as to achieve greater equity in the system. The introduction of the disability allowance scheme in October 1996 provided the opportunity to commence this process. 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.

These revised capital assessment provisions were extended 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 from October 1997 and to the rent allowance scheme for former controlled tenancies from June 1998.

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 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 was approximately 10 per cent in the case of 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 £20,0000, the new arrangements have improved the income position of the vast majority of old age pensioners.

In formulating proposals for the 1999 budget, my main priority for pensioners will be to continue to improve the basic level of pensions, in line with the commitment in the Programme for Government to increase the old age contributory pension to £100 by the year 2002. In this regard, the 1998 budget provided for a special increase of £5 per week for pensioners aged 66 and over — the largest increase which has been provided for the elderly since the early 1980's. It should be noted that all old age non-contributory pensioners, including those on reduced rates by virtue of having capital, received this £5 increase in full. The question of further improving the capital assessment procedures for pensioner would have to be examined in the light of available resources and having regard to the commitments contained in the Government programme, An Action Programme for the Millennium, Partnership 2000 and the national anti-poverty strategy.