Written Answers. - Pension Provisions.

Trevor Sargent

Question:

499 Mr. Sargent asked the Minister for Finance the plans, if any, he has to offset the disadvantages from the low interest rates related to the introduction of the euro to pensioners living off investments; and if he will make a statement on the matter. [1537/99]

The setting of official interest rates for the EMU area has been the responsibility of the European Central Bank since 1 January 1999, when third stage of economic and monetary union (EMU) began and Ireland and ten other member states adopted the single currency, the euro. The current low level of euro-area official interest rates is obviously a benefit to both business and personal borrowers, but it does also mean that savers and investors receive a lower yield on their investments.

I have every sympathy for pensioners who depend wholly or partly on investment income and have seen such income decline as a result of falling interest rates. However, it should be remembered that savers and investors will benefit from the low rates of inflation which are expected to accompany EMU by safeguarding the purchasing power of their savings and investments. I would also like to draw attention to the fact that an individual or couple, where one or more is 65 years of age or over, may be entitled to a refund of deposit interest retention tax (DIRT) paid on savings.

I would also like to mention the following benefits to pensioners living off savings and investments, which I announced at the presentation last December of the 1999 budget. In cases where retired people who derive an income from investments are also in receipt of the contributory old age pension, they will benefit from the pension increases announced in the 1999 budget. The increase for a pensioner couple will be £9 per week, which will bring the weekly payment to a couple both aged over 66 years to £148.90. In addition to the 1999 social welfare package, a special 50 per cent contributory old age pension will be paid to self-employed contributors who were over the age of 56 in April 1988 – when social insurance for the self-employed was introduced – and who have at least five years' paid contributions. This measure will provide a significant additional income to all who are eligible for the special pension, including those who derive income from investments.

In addition to the above improvements, a key priority of the programme for Government is to increase the personal rate of contributory old age pension to £100 per week. This will represent a further substantial real increase compared with the 1999 payment rates.