JOINT COMMITTEE ON SOCIAL AND FAMILY AFFAIRS debate -
Tuesday, 17 May 2005

Pension Overpayments: Presentation.

Chairman

I am pleased to welcome Mr. Paul Wilson, principal officer, Mr. Fintan Hanson, assistant principal officer, Mr. Denis Moynihan, assistant principal officer and Mr. Séamus McGinley, higher executive officer, who are here to make a presentation on the Department's overpayments/clawback policy in respect of the estates of deceased pensioners. The Department's most recent correspondence has been circulated to all members of the joint committee. I invite the delegation to make additional comments on behalf of the Department and summarise the position.

Members will also have received copies of correspondence e-mailed to the clerk to the committee by Mr. Matt Moran and circulated last Thursday. I take this opportunity to welcome Mr. Matt Moran, who is in the public gallery. He has been in continuous contact with the committee, with departmental officials and Ministers on the matter of the clawback policy on overpayments, on which he has spent a considerable amount of time in bringing to public attention and which obviously has exercised him. I thank him again for bringing the matter to the attention of the joint committee. Members will recall that there has been a considerable volume of correspondence on the matter since it was first raised.

Members are reminded of the parliamentary practice that they should not comment on, criticise or make charges against any person outside the House or an official, either by name or in such a way as to make him or her identifiable. Members who wish to make a declaration regarding any matters being discussed may do so now or at the beginning of their contributions. Members are also reminded that if there is a possibility of there being a conflict of interest, they should make a declaration of interest, either now or at the start of a contribution.

I draw witnesses' attention to the fact that members of the committee have absolute privilege but that this same privilege does not apply to witnesses appearing before it. While it is generally accepted that witnesses would have qualified privilege, the committee is not in a position to guarantee any level of privilege to witnesses appearing before it. These senior officials will be well used to this. I call on Mr. Wilson to make the initial presentation on this matter.

Mr. Paul Wilson

I am the principal officer in the national pension services office based in Sligo. We deal with the administration of the old age pension systems and a range of other long-term systems. I will begin by introducing my colleagues. Mr. Moynihan deals in our policy planning unit with the structure of the means testing, capital assessments, etc., and is a expert on that area. Mr. Hanson is the assistant principal in that pensions office in Sligo dealing with the old age pension administration and he will present material to the committee. Mr. McGinley is an inspector, based in Donegal, with a lifetime of experience in assessment of old age pensions, estates investigation work, etc., and can help us with any technical issues that might arise. I will ask Mr. Hanson to make our presentation.

Mr. Fintan Hanson

Entitlement to old age contributory pension is based upon a pensioner's means. The pension is payable at the maximum rate of €166 per week if the weekly means do not exceed €7.60. Where the weekly means exceed this amount but are equal to or less than €170.10, a reduced rate of pension is paid on a sliding scale.

In assessing the means, account is taken of any cash income the person may have, together with the value of capital and property, except the home. Capital includes savings, investments and cash-on-hand and is assessed by reference to a formula laid down in legislation. An initial amount of capital is disregarded before means are assessed. From June next, this disregard is being increased to €20,000 from approximately €12,700 or £10,000 which applied from October 2000. It should be noted that prior to that, the disregard was considerably lower, namely, £200 from 1979 to 1997 and £2,000 from 1997 to 2000.

The source of any capital held by a pensioner can and does vary. It can include savings from income while formerly working, savings derived from the sale of property or other assets, savings from occupational or social welfare pensions, gifts, inheritances, accumulated interest or dividends or a combination of these.

The rate of old age non-contributory pension payable in each case is set at a level that enables a pensioner to have an adequate standard of living. It would be expected that most pensioners would spend all or most of their pension each week in meeting their normal day-to-day living expenses. However, it is recognised that some pensioners may choose to save part of their non-contributory pension. Such savings are treated in the same manner as savings from any other source — for example, savings from an occupational pension — and the disregard comes into play. Any savings in excess of this limit are assessed in accordance with a special formula, details of which are set out in Appendix 1.

The new arrangements will mean that a single non-contributory old age pensioner, with no other means, can have capital of up to €28,000 and still qualify for a pension at the maximum rate. A single pensioner can have capital of up to €76,000 and still qualify for a minimum pension. These figures are doubled in the case of a pensioner couple.

There is an obligation on a person who applies for old age non-contributory pension to fully declare his or her means. When a person applies for an old age pension, he or she is visited by a social welfare inspector who investigates the applicant's means, including savings.

Once a pension is in payment, the pensioner is obliged by law to notify the Department of any change in means. Every pension book advises that the Department must be notified if the means or that of a qualified adult change. Means includes income from all types of employment, social security pensions from another country, occupational pensions, investment income, bank savings or income from any other source.

If the means are not fully disclosed, an overpayment of pension may arise. If, subsequent to the death of such a recipient, it comes to light that not all of the deceased's means were disclosed, social welfare legislation gives the Department the right to recover from the estate of the deceased any moneys overpaid. It should be noted that recovery of overpayments from estates does not imply that the deceased pensioner has engaged in fraudulent concealment of his or her means. We stress that point. Such recovery is based on new facts or evidence regarding the pensioner's actual means at given points in time.

The personal representative of a deceased non-contributory pensioner is obliged to provide the Minister for Social and Family Affairs with a copy of the deceased person's schedule of assets, together with three months' written notification of their intention to distribute the estate. The schedule is compared by the Department against the last means report provided by the Department's social welfare inspector in respect of the deceased pensioner. If there is no discrepancy between the means report and the schedule of assets, the personal representative is advised that it is in order to distribute the assets as there has been no overpayment of pension.

If, however, there is a discrepancy between the two, for example, the existence of a previously undisclosed bank account or a substantial increase in capital, then there is a possibility that a retrospective reduction or revocation of the pension is required. In any such case, the personal representative and his solicitor are advised by the Department that sufficient assets should be retained from the estate to repay any sum which may be due, until the question of any overpayment is finalised. Where it is ascertained that there is a possible overpayment, the file is forwarded to the social welfare inspector for investigation.

On receipt of the file, the social welfare inspector issues a letter to the personal representative requesting transcripts of bank statements and any other documentation or information that is necessary to establish whether an overpayment exists. By analysing the bank statements etc., the social welfare inspector calculates the revised means of the deceased pensioner retrospectively for the period during which the pension was paid. In addition, the social welfare inspector will often make an estimate of the amount of pension overpaid. When doing so, a flexible approach is adopted so as to take account of funeral and legal expenses for which the estate is liable. If the facts of the case are agreed, then the personal representative may propose a provisional settlement with the social welfare inspector in respect of the overpayment and hand over, or propose to, a cheque for this amount. The file is then referred to a deciding officer.

The following factors are taken into account by the deciding officer in considering the case: (1) whether the pensioner had means at claim stage which she or he failed to disclose and/or (2) whether she or he was subsequently reviewed and failed to disclose his or her full means; (3) whether the undisclosed capital was of a significant amount — more than £5,000 or €6,348.69; (4) whether the bank account was active, with the pensioner making transactions on a regular basis; (5) whether other undisclosed means, if any, was of a significant amount; (6) whether there is evidence that she or he was incapacitated or in poor mental health. In cases where a provisional settlement has been reached and the deciding officer considers that an adequate amount has been proposed in settlement of the overpayment, the deciding officer issues a formal written decision stating that the payment received is being accepted in full and final settlement to the debt.

Where a provisional settlement is not a factor, the deciding officer writes to the personal representative stating that based upon the evidence available, it would appear that an overpayment of pension has occurred, details of which are provided. The personal representative is afforded a period of 21 days in which to bring to the attention of the deciding officer any facts or evidence that he wishes the deciding officer to take into account before a formal decision is made. When the deciding officer makes a decision on the matter, this is notified in writing to the personal representative who has the right to seek a review of the decision. In any event, the personal representative also has the right of appeal against the deciding officer's decision to the Social Welfare Appeals Office. They are also advised of the method by which it is proposed to recover the overpayment, having regard to the Department's code of practice on the recovery of overpayments.

Deputy Stanton

I welcome the officials from the Department and thank them for coming to deal with an issue that has been raised with the committee for quite a considerable time. We also raised it in the Dáil with the Minister who agreed to examine it to see what is possible. The reason we are meeting today is to examine the issue. We recognise the threshold has been raised. The presentation states:

It is recognised that some pensioners may choose to save part of their non-contributory pension. Such savings are treated in the same manner as savings from any other source, for example, savings from an occupational pension, and the disregard then comes into play.

That seems to be part of the issue. I listened carefully to Mr. Hanson say that he expected most pensioners to spend the vast amount of their pensions. However, a number of people might have been extremely frugal and managed to save, purely from the non-contributory pension over a considerable amount of time, an amount over the actual limit. This is the issue on which we are focusing.

It is not clear from the literature that a clawback policy is in operation. In other words, when people apply for the non-contributory pension initially, it is not clear that a clawback kicks in when they die if the amount they leave is over the limit. This perhaps is something that can be readily addressed and Mr. Hanson might come back to the committee on that.

Mr. Hanson has referred to active bank accounts and undisclosed sums of significant amounts and so forth, matters we have debated with the Minister. Is it possible to know whether somebody has saved solely from a non-contributory pension? There are areas of taxation where people are required to disclose from whence they have got all their money. Theoretically someone could prove that all his or her savings came purely from a non-contributory pension. We must recognise that people save for the rainy day, for the nursing homes or for years ahead to do up their homes. We are all agreed that people should live for as long as they can in their own homes. Older people very often feel comfortable if they have a nest egg in case they get sick, need to go to a nursing a home or whatever. Would it be possible to facilitate pensioners proving to the Department that all the money in a nest egg came purely from a non-contributory pension, unlikely as that might be from now on? If that were the case, then the clawback would not apply. That is one way around the problem.

Mr. Wilson

The Deputy's first point is on savings. He says pensioners can often attempt to save from their pensions, possibly for the purpose of building up a nest egg. The difficulty is that when we come across a case at estate stage, the pension is no longer there. The late pensioner's affairs are being dealt with by a personal representative and knowledge is obviously not available to us as to the source of those savings. There is a real practical difficulty in that. Clearly the means test must take account of all savings and capital as they are found at the schedule of assets stage. In many cases the origins of such savings are far from clear. The pensioner is not there to speak for himself or herself, so there is a practical difficulty with that suggestion.

The point we are trying to stress in our note is that if the account is untouched and not active, and simply accumulates by virtue of the interest or dividends and so on, that typically would be discounted at the assessment stage. Where there is an active intervention in an account by the pensioner in his or her lifetime, we find that he or she had a conscious knowledge of the amount of capital in the asset. In all fairness that should have been declared to us. We have been consciously raising the capital exemption thresholds with a view to encouraging people to build up a nest egg for the rainy day, or indeed for their funeral costs. It is fair to say that capital assessment exemptions are quite generous. A married person can save up to €76,000 and still be eligible for some pension. We have seen over the years that a sizeable element of savings can be available to pensioners for difficult circumstances later in their lives and they are not penalised in respect of pensions.

The Deputy made the point that it is not clear to pensioners that a clawback exists and that perhaps we are remiss in not reminding them of that. We remind pensioners at all stages of the encashment process. In effect they should notify us of any change, as a matter of routine. Our information leaflets, which are widely available, make clear what the exemption thresholds are. They are readily available. In the past we have issued newsletters to pensioners from time to time as a customer service exercise, to remind them of the various exemptions. We can certainly look, however, at the Deputy's suggestion, to see whether this may be more widely promulgated.

I was incorrect, incidentally, in saying that a married person could save up to €76,000. That is for a single person. The married rate is up to €152,000, quite a sizeable amount, at which people can still qualify for a pension.

Deputy S. Ryan

I have some extracts from freedom of information requests to the Department of Social and Family Affairs. This one is signed by Mr. Hanson, as assistant principal officer. It says: "Our information leaflets, FOI guidelines and website do not specifically state that any social welfare pension incomes that accumulate savings might affect the pensioner's means."

Is Mr. Hanson acknowledging that basically none of the documentation circulated by the Department makes any reference to savings accrued from pensions?

Mr. Hanson

The Deputy is correct. It does not specifically state that. This is put into various information leaflets in an effort to clarify the position for pensioners. That is what we are doing currently so that people may be aware of it and readily understand it.

Deputy S. Ryan

The Minister has made the same statement. We have raised this matter with him in the Dáil on various occasions and at committees in the context of the savings to accrue from the SSIAs. He has said he wants to ensure that social welfare means testing arrangements do not act as a disincentive for claimants to become savers or do not harshly penalise those who have been regular savers in the past. The SSIA scheme was to facilitate people who could save. Many pensioners were not in a position to avail of the SSIA option but made very modest savings in the context of social welfare pensions. It appears to me that the policy implemented by the Department cannot be reconciled with the aspirations of the Minister, even in the context of savings that may have accrued within the SSIA scheme. Is this not an anomaly?

Mr. Hanson

It has always been the case under our legislation that savings are assessable as means. We apply a special formula to the savings in order to arrive at the weekly means. That has always been the position. We are now trying to clarify it so that pensioners will be aware that if they accrue savings directly from their social welfare benefits, such sums, depending on their size, could ultimately be assessed against them as part of the means testing process.

In regard to the SSIAs, the maximum amount that a pensioner can save under the scheme, including the Government contribution and interest, amounts to around €19,400. That is still less than the €20,000 disregard threshold that will apply from June.

Deputy S. Ryan

Is that figure being used right across the board in respect of all social welfare applications?

Mr. Hanson

That is correct. They are all means tested.

Deputy S. Ryan

They are all means tested applications, so this is some improvement.

Mr. Hanson

The disregard limit is approximately €12,700 at present and that will increase to €20,000 from the beginning of June.

Deputy S. Ryan

The point has been put forward by the Department at various stages that it might be difficult to assess where income came from, whether from social welfare benefits or not. If the Department really wanted to deal with that situation, this would not be a major problem and a mechanism could be devised to deal with it. Whenever the Government wants to take money from people, whether it is the Revenue or any other Department, there is always a mechanism. It can always devise a method whereby it can extract every penny. It is not acceptable in the case of the ordinary person to say that it is too complicated or difficult or that it will mean an inordinate amount of work for the Department. I would like Mr. Hanson's comments on that.

Mr. Hanson

It depends on how a pensioner saves a proportion of his or her pension. If €30, say, is saved each week and lodged to a bank account, it will be clearly identifiable in the bank statements. However, if the pensioner accumulates the money in cash at home and makes a lodgement, say, once every six months to his or her bank account——

Deputy S. Ryan

Could he or she not put it under the bed?

Mr. Hanson

I do not know where he or she might keep it. However, if lodgements are made only once or twice a year, it may be difficult in years to come for a social welfare inspector to satisfy himself or herself that such lodgements came directly from social welfare savings.

Deputy S. Ryan

A requirement could be put on it to be paid in on a regular basis.

Mr. Hanson

That could be a stipulation. However, under the legislation underpinning the old age non-contributory pension scheme, we must assess funds that accrue directly from the social welfare pension, provided they exceed the disregard threshold, which will be €20,000 from June.

Deputy Connolly

I welcome the delegation. The presentation was excellent. As I was reading through it I identified questions I must ask. Then the answer became self-evident after a moment or two, which is always a good sign. This is one issue which makes people anxious as to whether they might owe money after they die. It is one of the issues that affects pensioners greatly and they become quite concerned about it. If I want to ring the pensions department in Sligo, I note that it is always an 071 number. If there is an 1800 or freephone number, it is not well advertised.

Account is taken in assessment of means of any cash income the person may have, together with the value of the capital and property. There is a massive difference between the value of capital and property in, say, Dublin, Cork or the main urban centres and rural parts such as Cavan, Monaghan or elsewhere. How can an evaluation be made so that pensions are given in one area and not in another? The exception is the home. A home in the country normally means a house on a bit of land. Quite often that land, whether a ten or 20-acre farm, might have been extended by buying the farm next door, which would also have been considered to be the farm, while possibly having a separate deed. What happens if such land has not been declared as a second farm?

Someone may have up to €28,000 in savings before it affects his or her pension. What happens if somebody has €38,000 or €50,000? People think they will be crucified. Is it correct to say that it is just the interest on such money that is taken into account in assessing the pension? It is important for the committee to send out the message that people can have €28,000 in the bank and that it will be safe there. Otherwise old age pensioners are making themselves into targets. Many people are aware of individuals who deal in cash. We should send out a message to the effect that it is all right to have such savings in the bank. It is wise for people to put such moneys in the bank. Otherwise they are sitting ducks. I do not know how predators who are on the move around the country find out about such cases, but they seem to know who has money and who has not.

When a person dies the Department is notified that his or her assets are to be distributed. How wide a trawl does the Department make or does it just accept what is being done? In some cases people who have been somewhat cute in the past may realise their time is nigh and decide to withdraw the bank account and hand out €30,000 to each of the children, or whatever. In situations where possible overpayments have been made, does the Department apply a retrospective rate of compound interest or the same rate that it intends paying to those who have been overcharged in nursing homes? Will there be a difference in the comparable rates of interest?

What about undisclosed means that come to a significant amount? This document refers to cases where a provisional settlement has been reached and the deciding officer considers that to be an adequate amount. The type of language used leaves such matters open to interpretation. Who considers what is significant or adequate? It is dangerous language to use when the Department is going after people. It would be much better to state what the amount is and what punishments might apply thereafter, on the basis of whether somebody has €5,000, €10,000 or €20,000. A sliding scale should be provided and the mystique removed, so that people may definitively know what is considered significant.

Since the last meeting of the committee I want to put on record that I proposed a Standing Order 31 motion as regards the carer's benefit and people who applied for it from across the Border. These are people who worked, paid their tax, obtained leave and looked after their relatives in the Republic, but were debarred from the carer's benefit because they lived a few yards across the Border in Northern Ireland. The Minister has very speedily changed that legislation and I compliment him on the manner in which he dealt with it.

Mr. Wilson

I will address some of the issues Deputy Connolly has raised. On a technical issue, there is a lo-call facility for telephoning Sligo. We were very anxious to put that in place. That is clear on every letterhead and on every item of correspondence. It is a 1890 number and is available to anyone in the country. I stress that this service is available and there is a menu behind that number that directs people quickly to whatever service they want. It is a good service, we believe, for phone inquiries to the office.

My colleague, Mr. Seamus McGinley, may be able to address Deputy Connolly's point more accurately, as regards variations between areas on the value of property, capital and so on. He was making the point that there are differences between Dublin, for example, and Monaghan or Cavan.

Mr. Séamus McGinley

As an operational matter, we get a valuation of a second property. That is the market valuation, or the price a person could expect to receive for a second property if it were put on the open market. That is the criterion. This is added to any other capital that a pensioner or deceased person might have. Yes, there will be a variation. There is nothing we can do about it.

Mr. Wilson

Obviously we have area inspection teams around the country who are well aware of the local valuations of farmland, housing etc. When it comes to the assessment on the ground by the particular inspector dealing with a case, he or she is very well tuned in to the valuations that apply in particular areas. There is no question of applying some type of national norm or Dublin-based capital valuation to someone living in a rural area. It is very much judged on the prevailing market conditions in a given location.

Mr. McGinley

Absolutely.

Mr. Wilson

I stress that point to the Deputy. I might ask my colleague, Mr. Moynihan, to clarify the treatment of capital above the exemption limit of €28,000. It relates to a question on the rate of interest we apply. There is a clear-cut formula, which is straightforward and of which we would be keen to ensure pensioners are aware because it is quite favourable.

Mr. Moynihan

The disregard in respect of capital for all schemes is €20,000. In the case of old age non-contributory pension and widow's non-contributory pension, there is a general means disregard of €7.60 per week. Combining those two disregards, this means that a single pensioner can have €28,000 and still qualify for the maximum pension under the new arrangements. A single pensioner will be able to have up to €76,000 and still qualify for a minimum pension. The pension is reduced on a sliding scale, based on the €28,000 to €76,000 limits. The effective rate of assessment changes and increases as the amount of capital increases, reflecting the fact that a person with more resources has the ability to spend some of those resources to maintain himself or herself. Importantly, the figures I quoted are doubled in the case of a married couple.

Deputy Connolly

If somebody has €40,000 and the disregard is €28,000, it is not the interest on the additional €12,000 that is taken into consideration but that the person would be expected to spend some of that additional €12,000 to survive.

Mr. Moynihan

That is correct. In fact, a single person with €40,000 would be assessed as having weekly means of €30.

Deputy Connolly

That extra €12,000 would——

Mr. Moynihan

It would attract an assessment of €30 per week. We would then proceed to subtract the €7.60, giving an assessment of €22.40 per week. There is a reduced rate of pension payable for somebody with that level of means.

Deputy Connolly

Some €28,000 is quite a substantial amount of money for a person to have in a bank account. That clarifies the point I raised.

Mr. Moynihan

We publish a leaflet specifically for pensioners with capital. We are anxious that they should be aware they can have X amount of capital without having any effect on their pension. We would be particularly concerned that pensioners should not hold large amounts of capital in their homes.

Deputy Connolly

Does the Department send that type of notification to pensioners on a regular basis?

Mr. Hanson

It is not done on a regular basis. In the past we have issued a number of newsletters to all non-contributory pensioners outlining the amount of capital they have and the way in which we assess capital.

Deputy Connolly

It needs to be highlighted regularly. I feel strongly about it.

Mr. McGinley

The Deputy referred to a family farm. The original assessment of the farming activity as set out when a pensioner first got his or her non-contributory pension, or as subsequently reviewed, will remain neutral after the death of the pensioner; in other words, the family farm or any valuation will not be altered in any way other than that which was already entered on the file. It is a neutral factor.

The Deputy also may have mentioned compound interest.

Deputy Connolly

I did.

Mr. McGinley

In terms of recoupment where this becomes a factor, the Department merely takes back the amount overpaid without adding any interest whatsoever. The maximum the Department can recoup is the amount the Department paid out, without any interest whatsoever added to it. I say this in case the Deputy thought the Department adds interest to a bill; it does not.

Mr. Wilson

The Deputy mentioned the various factors of which the deciding officer would take account in determining the final amount due. I should stress all of those are really an attempt to be as fair as possible to the next of kin of the deceased pensioner. There obviously is an absolute amount, which is the amount of the overpayment calculated by the inspector. The deciding officer then judges the circumstance of the particular case and attempts to be as fair as possible to the next of kin. For example, account is taken of funeral costs, as Mr. Hanson mentioned already, or any other reasonable expenses.

The Department tries to give the deciding officer as much discretionary power to reach as sensible an arrangement with the next of kin as is feasible. It is not an attempt to nail down a precise amount. It is an attempt to be as flexible as possible. Having said that, we are protecting the interests of the taxpayer and trying to recover an overpayment which is due to the State. As is implied in that part of that note, however, we are doing it in a sensitive and sensible way.

Deputy Connolly

Will the Department define this idea of significant and adequate?

Mr. Hanson

In general, we are talking about the funeral and legal expenses that the estate will incur. Account is taken of those in arriving at the net amount that would be requested from the estate by the deciding officer.

Deputy D. Wallace

Like my colleagues, I welcome the officials to the committee. I find this the most interesting of many of the committee's debates. The people affected here are all recipients of non-contributory pensions from the State. They could be on the bottom rung of the ladder or on the highest, but they are recipients of non-contributory pensions. Is there an investigation by the State of every non-contributory pension recipient when he or she dies? If the relatives do not make the Department aware of the position, where does the Department come into it and how does it follow them up? Is every case investigated to ascertain whether a person had means which he or she did not disclose?

Mr. McGinley

If there is a schedule of assets in an estate, the personal representative is obliged by law to furnish a copy of the schedule of assets to the Department. If the Department does not have a claim, then a letter of clearance will issue so that they can proceed to wind up the estate. That would be the principal source.

Deputy D. Wallace

If the relatives do not notify the Department, is that it?

Mr. McGinley

No.

Deputy D. Wallace

I understand there is an obligation. Does the Department conduct its own investigation?

Mr. McGinley

The Department also systematically trawls through probate records in the relevant probate registers.

Deputy D. Wallace

Is every case investigated by the Department, whether the relatives notify or not?

Mr. McGinley

While I would not say every case is investigated, the Department has a system in place wherein attempts are made to discover cases which might be of interest to it.

Deputy D. Wallace

Would the Revenue Commissioners have an interest in this matter also?

Mr. Wilson

The schedule of assets which we receive is, in fact, the Revenue schedule of assets. It would be what was the old capital death taxes return.

Deputy D. Wallace

Is there a common approach in this matter?

Mr. Wilson

The schedule that we obtain is, in fact, the schedule that was prepared for Revenue clearance purposes.

Mr. McGinley

It is the inland Revenue affidavit. Revenue will have had sight of this concurrently but quite separately from any social welfare interest that might occur in a particular case. There is no joined-up action.

Deputy D. Wallace

The other aspect of concern to me is the defining that the money is actually the person's pension money. If a person receives a non-contributory pension for 20 years and two years before he or she dies money is given to the person by a family member or whoever, how does the Department establish that the money concerned is their pension?

Mr. Hanson

The issue is not whether the money was given to the pensioner by a relative or whether the pensioner accumulated the money directly from his or her social welfare pension. If either or both of those circumstances arose, the total amount of savings in question would be subject to the means test, provided it exceeded the €20,000 disregard.

Deputy D. Wallace

I note the statement that it should be noted that recovery of a old person's assets does not imply the deceased pensioner had engaged in fraud or concealment of his or her means. If I were being investigated I would feel to some degree that this was the line being adopted.

Mr. McGinley

I have been dealing with this issue in the north west for several years. Where there was agreement, many solicitors and personal representatives stated they would prefer to have it done in this way after the older person had passed on rather than for them to be harassed in the final years of their lives. That may be an insufficient counter point but it has been stated on a number of occasions.

Deputy Boyle

There are two aspects to this issue. First, we have the inconsistency of the clawback in comparison to how other moneys given by the State are treated. The recent scandal of pension payments and nursing home charges is being treated separately. The Minister for Social and Family Affairs has made a statement in regard to SSIAs. We were led to believe that compensation paid in hepatitis C and haemophilia cases was treated as an exemption. Prize bond winnings also have a total disregard attached to them. There is also the matter of compensation received through the courts system for personal injuries. On that level, is the Department not somewhat out of kilter with how the State generally treats money given by it to people in similar circumstances? Why are pensioners who are in receipt of the lowest pension from the State singled out for this type of treatment?

My second concern relates to the fact that a clawback occurs after the death of a person using the documentation the State is obliged to supply to the Revenue Commissioners. What the Department of Social and Family Affairs considers it is obliged to do is not in line with the treatment of disregards in terms of inheritance tax and capital gains tax by the Revenue Commissioners. The clawback is effectively death duties for non-contributory pensioners. In a sense it is an after-tax tax which the Department considers it is entitled to impose on the estate of dead pensioners.

There also appears to be a mindset within the Department that does not allow people the opportunity to save, despite the fact that savings here are among the lowest in developed countries and that the contributory pension is the lowest as a proportion of average income of developed countries. It is utterly contradictory that the Government has a policy of encouraging people to save while at the same time stating that the pension they get is insufficient for their needs. I accept the Department officials are not directly responsible for policies but the implementation of this policy is a glaring contradiction that is exposed on a daily basis.

I presume the documentation relating to declared bank accounts supplied to the Revenue Commissioners is the most common method of determining the level of savings and whether money can be clawed back. Many of us argued against the money in the shoe box under the bed approach as it put pensioners at severe risk within their own homes. The last thing we want to see is a return of the black economy approach to savings which was traditionally practised by pensioners and elderly people to meet needs they believed were not being met by their families, the wider community and especially the State. How does the Department square these inconsistencies with the types of policies we would like to see put in place and the confidence we would like to give senior citizens and pensioners?

Mr. Wilson

The Deputy raised a number of issues. He stated that there are inconsistencies between the treatments of various types of savings. As we outlined in the briefing note, in general savings are treated in the same way. Mr. Hanson has outlined the way in which that is done, including capital assessments.

Deputy Boyle

I mentioned specific exemptions.

Mr. Wilson

I understand that. These exemptions are in the legislation. They are typically brought in for a particular social purpose at a given time. Over the years a number of specific exemptions have been added to the so-called Third Schedule to the Social Welfare Act by decision of the Government and Acts of the Oireachtas. We are applying the rules as they exist. If specific types of exemptions are required for social purposes or other reasons then they can be legislated for. We operate the legislation. As the Deputy stated, there are specific exemptions for things like injuries, prize bonds and so on. Elements of exemptions are built into the legislation which we then apply.

Mr. Moynihan

I shall clarify a number of issues on the assessment of capital. As Mr. Wilson stated, we generally treat savings or investments without regard to their source, with a limited number of exceptions. As Deputy Boyle outlined, those exceptions include compensation from the HIV tribunal, the hepatitis C tribunal, compensation for haemophiliacs, compensation received from the Residential Institutions Redress Board and also compensation received by persons who suffered because of thalidomide. Prize bonds are not exempted and neither is other compensation received through the courts. A prize bond win is regarded as normal savings.

A couple of things are important in terms of the estate cases with which we are currently dealing. While we are looking at an improved disregard from June next, which was last improved in October 2000, the disregard prior to that was quite small. For example, from 1979 to October 1997 the disregard was just £200, which was very small. It increased to £2,000 in October 1997. In many of the cases, the overpayments relate to those periods when there was less flexibility than at present for people to save.

Mr. Wilson

I question the Deputy's assertion that some kind of double taxation is involved. It is a straightforward issue. An old age pension rate is paid which is predicated on the means of the pensioner. Where those means are different from those on which the pension is based we have an obligation in law to recover the money paid.

Deputy Boyle

The Department asked the Revenue Commissioners to assess these cases and they have given a clear indication that there are no tax liabilities.

Mr. Wilson

The Revenue Commissioners assess for tax purposes and so on——

Deputy Boyle

If the Revenue Commissioners say there are no tax liabilities and the Department subsequently takes money, then that is a double tax. That is the effect of it.

Mr. Wilson

We are dealing with the old age pension paid to a person. The pension paid during a pensioner's life is predicated on a certain knowledge we have of the means of the pensioner at the time. There is an obligation on the pensioner to notify us of any changes in those means. The vast majority of pensioners do that. They are very diligent and honest and notify us at the time of any change in their means and we adjust their pension rates to reflect that. When new information on a pensioner is made available to us through the schedule of assets we take a fresh look at his or her means information and where there are discrepancies we obviously have no choice but to make an adjustment to the pension that would have been payable to that pensioner had we known this information earlier. We recoup that amount of overpayment from the estate.

Deputy Boyle

Let us suppose it was the other way around, the person had spent all his or her money and had no savings, the estate was presented to the Revenue Commissioners and there was a tax liability. In that case there is a charge on the estate from the Revenue Commissioners and there is no subsequent money that can be claimed from the Department of Social and Family Affairs. At the moment if people have their estates cleared, there is no tax liability and the money is spent, the Department takes no money back, whereas the Department decides it can take money if some remains after liability is cleared. That is an utter inconsistency.

Mr. Wilson

It is not. The only money we would take is money of which we were not previously aware. If, for example, a person had declared means of a capital amount of €40,000 above the assessment level and had a reduced rate of pension payable to them as a result, we do not get involved. The situation we are talking about here is if there were something undisclosed or an unknown accrual of savings over time. Under general obligation pensioners must notify us about this. Where we become aware of this subsequent to death we have an obligation to the taxpayer and under legislation to make the necessary adjustments and negotiate to recover the overpayment. That is the entire process.

Deputy Boyle

The Department assumes, probably correctly, that the only source of income was the pension because it does not know the source of the savings.

Mr. Wilson

No, that is not correct. There are a number of statutory exemptions and the next of kin will do his or her best to ascertain the situation. If there was a HIV exemption or one of the other items that qualify for an exemption we take account of that at the assessment stage. There is no retributive recoupment by us. Do the facts we know now concur with what we knew at the time we awarded a particular rate of pension? If there is a difference we must seek to recoup that difference under law. If it is the same we clear the estate for disbursal. I stress that it is not a taxation but recovery of an overpayment of pension which arose unwittingly.

The vast majority of pensioners are very honest, are conscious that this is a means-tested payment and declare their means openly to us. Apart from our obligations to the taxpayer and under legislation, we have an obligation to those who declare means and have their affairs dealt with properly to treat all pensioners with equity. This is not a retribution system of any sort but a technical adjustment to the pension rates payable to the person as the full facts are known.

Deputy Boyle

There were two particular questions that Mr. Wilson might take time to answer. The Department seems to assume that the non-contributory pension at its highest level means there is no capacity for the individual pensioner to save. What is the Department doing to discourage the widespread practice of black economy savings, the shoe box under the bed? This may be a reaction to the continuance of the Department's practice.

Mr. Wilson

We are extremely conscious that in the late 1990s there was a spate of robberies of pensioners. There was a view that the Department of Social and Family Affairs was taking a punitive view of savings. Improvements of capital exemptions, as outlined by my colleague, Mr. Moynihan, were a response to that. There was an attempt to encourage pensioners to declare their savings, put them aside, have a sizeable nest egg available without penalty on the pension rate, and we strongly urge all pensioners to put their savings into some reputable savings entity. All pensioners should ensure their savings are not kept in any way that endangers them. The capital exemption rules are there to encourage pensioners to do that and are at levels that encourage them to do so.

Deputy Boyle

What about the capacity to save and the pension rate?

Mr. Wilson

The rate set is a matter for Government. The current rate is a little more than €166 per week. It is not a significant amount compared to average earnings. It is a low subsistence income and it is what is needed for them to meet their normal living needs. Their scope to save any significant amount would be limited because of the cost of living. The pension is adequate to help them with costs such as heat, light, food and clothing. If pensioners can be frugal and save money that is their choice. The pension is at a level we hope would comfortably meet their living requirements, but may do so only barely.

Deputy Ring

Does Mr. Wilson think the banks are reputable institutions to put pensioners' money into? Many elderly people with some money to invest were advised by the banks, who then put the money into offshore accounts. These people did not know what an offshore account was until the Revenue Commissioners contacted them. Does Mr. Wilson think it fair that the Department can go back as far as it likes and take money back from people on a non-contributory pension? At the same time there have been a number of cases where people did not realise they were entitled to a contributory pension because they had their own private pension. When they look for that pension the State says that it can only pay six months in arrears, even though they might look for the pension four or five years after entitlement. Does Mr. Wilson think that is right?

The situation is similar to the offshore accounts and the long-stay nursing home charges. In the latter case the Statute of Limitations has been invoked and there is a limit of six years. Investigations into offshore accounts and insurance schemes are going back 20 years. Why does it have to be different for the State and the people? We are all in the same State and the State is supposed to look after the people. Why are there two sets of rules? Why is the Statute of Limitations not used to limit the timeframe to five or six years? Some of the pensioners have been very sick and have had Alzheimer's disease. Relatives looked after patients with Alzheimer's disease for ten or 12 years felt guilty taking money, lodged it in bank accounts and hoped the money would be distributed among the family. Then the Department comes along and claws that money back. It is very mean.

A number of people contacted me to say they had told the Department of Social and Family Affairs their means had changed. The Department acknowledged the situation had changed and said it would send out someone to investigate. The Department continued to pay the full pension. For example, one lone parent notified the Department that she was going back to work. She was entitled to the half rate and was paid that for 12 months. The Department continued to pay her even though she notified them. The Department of Social and Family Affairs sent threatening letters to her, saying they would take the money back. When the Department makes a mistake should there not be leniency? I could provide the committee with five or six other cases where people notified the Department of a change of circumstances but nothing was done about it.

What is the procedure for recording these notifications? Is notification sent on to the appropriate section or does someone take a phone call and forget about it? I know about that because one can ring the Department and be assured that a response will issue in half an hour. Three days later one has to ring again and the person says he or she forgot about the original call. Is there a system of checks and balances in the Department if someone notifies it of a change of circumstances?

Deputy Boyle is correct in saying that people are being encouraged to put money under the bed. In the past many elderly people were beaten up and robbed by gangs. We must be careful how we treat the elderly. These are the people who founded the State and some do not have the contributory pension and they save a bit of money. There was always a tradition in this country that elderly people put some money away for the rainy day and for the funeral. Now, when they die, after the family has cared for them the Department of Family and Social Affairs claws back money even though the estate has gone through probate. It creates much annoyance and anger within families. There must be a simpler way. The Department of Social and Family Affairs advertises before the elections, giving the Minister the opportunity to outline the rights of people after the budget. It might be better if the Department spent the money regularly publicising the danger of storing money, and letting those on a non-contributory pension know the sum they can hold in their bank accounts before they must declare it to the Department of Social and Family Affairs.

Mr. Hanson

The Deputy contrasted how the Department deals with overpayment to persons on old age contributory pensions and those on non-contributory pensions. He stated that in respect of the old age non-contributory pension, the Department goes back for years to pick up an overpayment whereas if money is due to those on old age contributory pension, the Government will go back only six months. The situation in regard to old age contributory pensions is that where a person applies for an old age contributory pension late, we will automatically pay back arrears for a full 12 month period. We will also pay additional arrears beyond the 12 month period on a proportionate basis. There is a formula for paying those arrears. In exceptional cases, for example if a person applied late due to the Department giving him or her wrong information or through an act of God, he or she was unable to apply for the pension on time or if the delay in applying for the pension was due to a medical incapacity or if he or she were currently suffering financial hardship, the Department has the ability and capacity to pay arrears right back to the date on which he or she would have become entitled to the old age contributory pension at age 66. When people contact us about arrears of old age contributory pension, we notify people of our policy which has been in place since 1997.

Deputy Ring

It should not be a policy. The law of the land should quite clearly state that if persons pay their dues to the State and for whatever reason do not draw down the contributory pension on the due date, they should not have to look for concessions from the Department. If people are due their pensions but for some reason, whether health, misunderstanding or misinformation, did not apply on the due date, once they make the application for that pension they should get it from the date it was due. The Revenue will, in a similar way, claim it from people who are involved in the insurance scam. The same law that applies to the State should apply to the people. People should not have to make a case if they are entitled to a contributory pension.

Mr. Hanson

I have outlined the legislation under which the officials of the Department of Social and Family Affairs operate.

Deputy Ring

I understand it is the legislation. Sometimes the Minister does not understand social welfare legislation, which creates a major problem.

Deputy Finneran

The leader of the Fine Gael Party made a major mistake. Deputy Ring should have been appointed to the shadow Front Bench.

Deputy S. Ryan

Next year.

Deputy Ring

It is only a matter of time.

Deputy Finneran

Three Mayo men at the top then. I welcome the officials from the Department of Social and Family Affairs

I have read the document that was circulated, which contains a number of important statements. It is well worth noting that a major change has taken place in terms of the disregard. It was a source of great annoyance that so little was allowed to be disregarded for so long and I had spoken on the issue and I know motions were put forward by the General Council of County Councils where it was debated on many an occasion. It was not until 1997 that there was any real movement. Even though the percentage rise was large, it was not until 2000 that it increased substantially. Is it correct that the disregard has increased from £200 in 1997 to €28,000 today? That is worth mentioning. Having a nest egg gives people a sense of security. While €28,000 will not buy a great deal, it provides comfort to a pensioner. It may not keep them in a nursing home for very long because that money is taken into consideration when they apply for a subvention. It is clawed back by the State but that is an issue for some other forum.

In regard to non-contributory pensions, the clawback from the over-payment has reduced significantly since 2000 from 580 cases to 87 cases and I think it was Mr. Paul Wilson who said the change in the disregard has been responsible for that. I agree it has been partially responsible for it, but another major difference is that in 1988 self-employed people were allowed to join the social welfare system. Many people did, but unfortunately some did not avail of it. I suggest that the number of applications for non-contributory pensions would have decreased dramatically since 1998-99, when the ten year period kicked in after the introduction of PRSI payments for self-employed persons in 1998. Perhaps that figure could be supplied to the committee at some stage because we could use it in further investigations of social welfare payments. If the officials have the information available, well and good, but will they forward it to the secretariat?

The area that causes me as a public representative the greatest problem, and I know my colleagues in rural constituencies are experiencing similar problems, is how the Department of Social and Family Affairs evaluates the income of a person who owns a farm. It is complicated and uncertain. I cannot give advice to any of my constituents on this matter because in some cases I am 100% wrong or near enough to it and in others I am 50% right. For the life of me I do not know if there are any set rules and regulations in this regard. What value is put on a cow or on a two year old beast bought in as a calf? The interpretation and evaluation in these cases are a mystery. How they are arrived at and applied to a farmer with 30 acres, three or four cows and 20 sheep in order that he or she is ineligible for a pension is difficult to understand. In such cases the farmer has no income other than sustenance from the farm itself.

I recall the case of a farmer and his wife who had 30 acres and a certain number of stock. They qualified for a reduced pension, which was about two thirds of the non-reduced pension. The farmer died and his wife informed the Department. She was required to return the pension book and was reassessed, as a result of which it was deemed that she was not entitled to any pension at all even though she and her husband had been receiving the reduced pension when the latter was alive. I wrote to the Secretary General of the Department and stated I could only conclude that the farmer must have been a terrible financial burden to his wife when he was alive. There should have been some type of pension which his wife could have drawn. The number of stock did not change after the farmer's death. The explanation the Department gave was that there was a divided moiety. All the lady in question could do was sell her stock, pay off the creamery bills and set-aside the land, which was worth €300 or €400 per year. Having done this, she qualified for what I believe amounted to seven eighths of the pension. This was not an appropriate way to have to proceed, but it is what happened.

Is there a detailed breakdown of how the value of land and stock are calculated? I would like to have such information available when dealing with constituents. I am dealing with cases at present and have requested information thereon from the Department. However, it is like throwing them into a pot. People come to my clinic and I am not in a position to give the advice I would like to give.

The document before me states clearly that there is a disregard of €28,000. Those self-employed people who did not pay PRSI, many of whom are living today and too proud to give up their couple of cattle and set their land, are doing without a pension. There are some such people in my constituency and more in other constituencies in the west and perhaps in other areas.

Mr. McGinley

The Deputy made a number of points on the assessment of farms. I cannot comment on specific details because I simply do not know the facts. Essentially, the assessments involve the completion of a profit-and-loss document by a social welfare inspector. I can supply the Deputy with a copy if he wishes to have one. We assess for the future and we consider the income of the past 12 months as indicative of what one may reasonably expect to earn in the coming 12 months. There are disregards for losses and the assessees are usually given a copy of the farm assessment for their own perusal and comment prior to a decision being made.

Deputy Finneran

I have a stack of them in my office. Every constituent who contacts me in this regard brings me a copy of the assessment.

Mr. McGinley

That is the way it is done. It is done on a simple profit-loss basis. The assessment does not consider depreciation to the same extent that an accountant's profit-and-loss statement would.

The Deputy also contended that, on the death of a spouse, the fact of death in itself should not militate against the entitlement of the survivor, if that person is also a pensioner. A moiety at the date of death is applied. The fact of death in itself should not militate against the survivor in the absence of new or additional means. There may be specific circumstances in specific cases regarding which this is not the case but we are not in a position to talk about them at this forum.

Deputy Finneran

Can we have a copy of the guidelines?

Mr. McGinley

I will try to obtain some information in that regard for the Deputy.

Chairman

I will ask for it to be given to the clerk, who will make it available to all committee members.

Mr. McGinley

The committee members will appreciate that we are straying slightly from the topic in question.

Chairman

I appreciate that.

Mr. McGinley

However, we will endeavour to do something.

Deputy Carty

I, too, welcome the officials. I have a number of questions directly related to the subject matter of this meeting. Mr. Hanson referred to the issue I wish to raise. If it could be proven that John saved so much out of his pension each week, would it be clawed back? If he had a small farm and it could be proven without doubt that his herd number was zero, that he received no income from his land, including grants, and that he had saved more than €28,000 out of his pension, would there still be a case for a clawback? His income could be proven easily by the Department of Agriculture and Food.

Mr. Hanson

There would definitely be a clawback if the total savings derived from the social welfare pension exceeded the limit of €20,000, or €28,000 if he had no other income whatsoever. This is in accordance with the legislation under which we operate.

Deputy Carty

That is totally unfair. There are people who live frugally and consequently have such savings. If a person in a nursing home received a payment of €29,000 from the HSE as a result of his having been overcharged, it would not be means-tested. However, if his brother had stayed at home and saved up to €29,000, he would be means-tested. If this fair? This issue will have to be addressed.

Mr. Hanson

It may have to be considered by the Minister but we can only operate in accordance with the legislation governing the pension scheme. That is what we are doing. If there are anomalies, it is up to our political masters to address them.

Deputy Carty

I have encountered cases such as that mentioned by Deputy Finneran in which people applied for a pension and were turned down. It was not because they had money or significant stock but because they were just over the limit that applied in the assessment carried out by the social welfare officer. In one case, I got a Teagasc officer to carry out an assessment for a certain person and, on foot of this assessment, we eventually secured for him a pension of €8. Owing to the living alone allowance and other benefits, he exceeded the threshold of €20,000. He got the free travel pass and I can assure the officials that he will be getting a much higher pension under the next review because he has now taken to travelling and his stock are being disposed of. He is beginning to see there is another side to life. If a person in that position had verified accounts from an accountant or a farm adviser, would that be acceptable to the social welfare inspector?

Mr. McGinley

They would be used as a reference point but not as the final set of accounts. In accountancy a number of stratagems may be used such as depreciation which is not applied in the usual way by the Department of Social and Family Affairs for farm assistance. While the accounts will be used as persuasive documents, the figure arrived at by the accountant might not necessarily be the same as the one worked out by the local social welfare inspector.

Deputy Carty

Does Mr. McGinley not find that peculiar in that the Department of Finance will accept them for tax purposes?

Mr. McGinley

Maybe so but I am telling the joint committee the way it is done.

Mr. Moynihan

The difference is that the Revenue Commissioners and the Department operate under different legislation. We do what ours provides for. The Revenue Commissioners do what theirs provides for.

Chairman

On that point, do the delegates agree it is high time there was an harmonious development and interpretation of legislation applying to similar circumstances in regard to submissions to the Revenue Commissioners and the Department of Social and Family Affairs? As regards reviews, in normal circumstances, except where fraud is involved, is the Department not statute barred in relation to the figure of six years?

Mr. McGinley

This issue was tested in the courts not too long ago in the Scanlon case, of which members may or may not be aware. It involved a High Court decision by Ms Justice Laffoy which limited the Department's right to operate under section 249(b), possibly back to 1993. I am not speaking technically but rather relying on memory. This decision was overturned by the Supreme Court, thus allowing the Department to go back to the date of receipt of a particular claim.

Chairman

I would like to see that decision. Certainly, I am anxious to ascertain the basis on which the Supreme Court arrived at its conclusion.

Mr. McGinley

It certainly is in place.

Chairman

That brings us to another area, the distinguishing feature we are discussing today. I agree with my colleagues. Why should the Revenue Commissioners accept depreciation as an element of cost accounting while the Department of Social and Family Affairs does not? It is calculated as a percentage of wear and tear, using either the straight line or reducing balance method. The Department of Social and Family Affairs is often apt to apply imputations as regards costs. It rarely relies on actual costs. If there are ten cows, it assumes they will be valued at so many euro. That cannot be right. One has to deal with actualities.

Mr. McGinley

We will look for the sales receipt. A cow will be worth her offspring and is not a capitalised entity.

Chairman

I am aware of that since I am involved in this area. However, I could never understand and have always been perplexed at how the Department was inclined to impute values as opposed to actualities which might well be available.

As regards the question under review, we are talking about assets derived from social welfare sources. We are not interested in non-social welfare derivatives such as capital or the national lottery, prize bonds or anything of that nature. They are not under consideration. The next of kin would benefit in any event.

There are people in rural Ireland who are extremely frugal. I know them. I have represented them for ten years. They have tended their own rood of land, grown their own cabbages and saved. Perhaps many of us younger individuals should take a leaf out of their book and learn how to save. Perhaps we would be glad to return to such frugality. They have put by the odd €20 for the rainy day or pay for the funeral. Elderly people have great pride. They engaged in such saving initiatives before the period of supplementary allowances which are now available to ensure everybody has a decent burial. If these moneys which have been subjected to a means test by the Department of Social and Family Affairs without any transformation of assets have been put into institutions such as the credit union, the poor man's bank, why should they be subject to further assessment? Would it not be simpler to recognise the reality and say there should be a further disregard for those in receipt of non-contributory old age or widow's pension in order that they could save up to 25% of their incomes? Can we not get around the problem in this manner? It would encourage people to save, which is what we want them to do because the propensity to save in Ireland is very poor as opposed to that in other European countries.

It is a natural reaction of elderly people — spinsters and bachelors. I know them. They would not tell one the time of day and have their own way of conducting their affairs. Could we not recognise that they may well have saved and ultimately encourage them to put such savings into an appropriate institution? Oddly enough, if someone keeps the money in a sock under the bed and dies and I am a beneficiary and collect €10,000 or €20,000, it is goodbye to the hills.

Mr. Hanson

In response to the proposal the Chairman has made, if the Dáil were to enact such legislation, we, as officials, would have to implement it.

Chairman

As experienced officials, you have risen to the highest areas of the Department. You have been very helpful to us today. This briefing document is one we will keep carefully, along with the other when we get it. I recognise how helpful you have been. However, I hope that you appreciate the nature of the problem.

Mr. Hanson

Yes.

Chairman

We have spoken to the Minister even more straightforwardly than we have spoken to you. After all, he is the master. The Minister asked if it is possible to trace it. I studied law and it is possible to trace everything. There is a case dating back to the 1800s, the Chaucher case, where one could trace all money concerned, be it inter-mixed or intermingled.

The person who has brought this case to our attention has invigorated us with a need to deal with it because it applies throughout the country. Our concern is not for the people who have plenty of money or who get money from other sources such as relatives who die leaving them €30,000, €50,000 or prize bonds. Our concern is for persons who keep their money in a shoe box, in a sock or under the mattress and who die leaving €40,000. I know some might say — Mr. Wilson and his colleagues are too gentlemanly to say it — that the next of kin will benefit anyhow. If one wished to make the other argument, that is what one could say. This is not about that.

This is about people who get a pension of €150 and live on €110 or €115. I agree with the good point made by Mr. Wilson, that the pension is barely adequate. However, a person can sow a few spuds, grow his or her own cabbage and live frugally, and once in the blue moon take the odd shot of whiskey or whatever. These are the types of people of whom we speak, those whose neighbours bring them places by car and who have no motor expense. If such people do save their €30 or €40, we should recognise the reality and encourage the concept. This would make the lives of these officials easier in so far as they would not need to trace or chase because a certain level of disregard would apply to savings, which have already been subject to an assessment by the Department.

Sometimes I do not like the assessment method. I am a believer in actualities as opposed to putative values. Sometimes in the Department's game putative values are used. I know why — I am not a fool — but I do not like them. That is neither here nor there. That is not today's issue.

Today's issue is whether we can deal with a problem causing significant difficulties for people who are administering the estates. These are relatives or distant relatives who must explain all this. The Department made a good point, that no person involved in a reassessed case should ever feel that there is an imputation that something untoward happened. That point was made fairly and I appreciate it. Sometimes the adage that there is never smoke without fire is applicable. People do feel an imputation. Sometimes forgetfulness or inadvertence may apply and we all are guilty of sins of omission at various times. It is a considerable task to get at the degree to which there is deliberate concealment and I am glad the Department recognises that is the case.

My view is that the only way we can deal with this issue is through legislation and I ask the officials to bring that view to the Minister. The committee will certainly be reflecting on it. There would be a view that this issue should be tackled from this perspective rather than by opening the floodgates. From my knowledge of social welfare law, which would not be as detailed as that of the officials, I realise that if one deals with one anomaly, one may create another anomaly. I appreciate that. If we make the law, as Mr. Hanson stated, there are no better people to implement it than these officials.

On behalf of the committee, I offer a possible solution to what seems a difficult ongoing problem. The Minister will receive representations, from his own colleagues as well as from us. He will come before the committee fairly soon and we will present this to him. We are being fair to the officials. I am sure the Minister will go back to people like them. They are forewarned of our thinking and he will obviously need some assistance in that regard.

Deputy Callanan

Although nearly everything has been said, I wish to raise a couple of points. I welcome the increased disregard which has been introduced. The previous position was bad. When a single person with no other income can have €26,000 in the bank, and a married couple €52,000, in all fairness the present position is not too bad. That is a reasonable amount of money in my part of the country anyway. What percentage of cases before the officials would not have declared the income properly?

I am a farmer. In some cases a mother owns a farm and a son has some stock on it. How does the Department work out such circumstances when a case of overpayment comes before it? Does the Department recognise that the son was involved in the farming concerned, even though he may not have been the legal owner of the land?

Mr. McGinley

If there was not a reinvestigation of the case, the original assessment whenever that lady first received her pension would hold good throughout. If she did leave some savings after her death, therefore, the farm assessment would remain as was. It would be a neutral factor in any computation after her death. Often a son bolsters up a farm, etc., but that is not factored into the assessment of the mother's estate after death.

Deputy Callanan

What about my first question? Have the officials any idea?

Mr. Wilson

We do not have figures on that but we can certainly get them for the committee. Broadly speaking, the numbers in front of the committee in Appendix 2 of that document would show that there are in the order of 300 to 500 cases per annum. In broad order, in the scale of 5,000 to 6,000 deaths per annum, it would be that scale. In broad order, approximately 10% of cases might reveal some form of overpayment. We will clarify those figures.

Chairman

We appreciate the broad order of those figures. If Mr. Wilson has further documentation, he can certainly submit it to the clerk to the committee.

Deputy Carty

A person who had €100,000 in the bank was assessed by the Department as earning interest of €16,000. Surely that figure is ridiculous. Nobody with €100,000 is earning such interest. Is there any way the officials could look at that in a practical way?

Mr. Wilson

Where a person saves his or her own pension, for example, we would encourage him or her to be open about it, put it in a savings bank where it will be safe and declare it to us along the line. They are allowed save up to €28,000 without any effect on their pension. That is quite a significant amount of savings on a weekly basis, as the Deputy's example outlined. Thereafter, the rate applying is roughly €1 per €1,000 for the next €10,000. For each €1,000 of the next €10,000, therefore, €1 per week of means is imputed from that and a reduction of €1 per week in the person's pension is applied. For the next €10,000, there would be up to €10 reduced. Thereafter, €2 per €1,000 is imputed and there would be a scale.

It is in pensioners' own interests to save and declare that openly to us. There is a high threshold before any impact is made on their pensions, as we already discussed. The marginal reduction in their pension per week is negligible for the savings that they are accumulating. As a matter of operational policy at our level, we are keen to encourage people to save their pension safely. They should not put it in a sock or in a box under the bed. They should put it in a bank account. They should declare it to us at the levels outlined and we will treat it fairly in accordance with the rules. Then there is no issue at estate stage because it is already dealt with during their lifetime. There is an in-built incentive for them to save their money to build up a nest egg and for us to deal with them in a fair and straight manner. That is what we encourage pensioners to do.

Deputy Callanan

Does the Department revert to the 15% again when referring back to the 1990s?

Mr. Wilson

As Deputies will appreciate, the legislation has evolved over time. As officials, we have to apply the legislation as it was at that time. What we are trying to do is to say, had we known about those facts at that time, this is what the pension would have been.

Deputy Stanton

It is enlightening to sit here listening and learning and I am sure we could spend a great deal more time on this matter. Mr. Wilson stated that he would prefer if people declared savings at the time. How many people do that on an annual basis?

Mr. Wilson

My colleague, Mr. Hanson, will clarify exactly how many. Thousands of people apply to us for a review of their pensions at their own initiative.

Deputy Stanton

A number of non-contributory pensioners would do that each year.

Mr. Wilson

In the order of 3,000 or 4,000 per annum would come to us for a review of their positions.

Deputy Stanton

According to the Department's figures, that would leave an average of 450 people from whom the Department would reclaim money. Would that suggest the information they are getting is not as clear as it could be?

Mr. Wilson

They may have been in touch with us during their lifetime. It may be the case that the information was not sufficiently clarified to us or that there was some account which they forgot to declare etc. There may be some inaccuracy in the information. People may or may not have been in touch with us during their lifetime.

Deputy Stanton

The wording, "Your means or that of your qualified adult change" and "means includes income" may not be easily understood by older people who may not have much education. The language is perhaps a little convoluted. Perhaps that could be written in clear English. It must be clearly stated that if one goes over a certain amount of income that some money received in pension payment could be owed to the Department.

Is it possible to do what colleagues have suggested, namely, to take the pension payments from a person's estate? Do the Department officials believe it would be possible to do this if we convinced the Minister to make a change in the legislation to allow for it? Would it be possible to administer a system whereby a person could come to the Department and demonstrate that the savings in his or her account had come from the non-contributory old age pension?

Mr. Wilson

To be truthful, that might be difficult to do in practice. In these cases we are dealing with the estate of deceased pensioners so we have no information about their lifestyles except what we may hear from a distant relative or some other personal representative. In practice, it might be difficult but if new provisions were enacted by the Oireachtas we would do our best to ascertain the source of the saving retrospectively.

Deputy Stanton

How long has the concept of people saving solely from their non-contributory pensions been an issue in the Department? Has it come up before and, if so, how often has it arisen?

Mr. Wilson

To be honest, we have dealt with the estates of pensioners for decades. It always has been a feature of the legislation that we had the right to retrospectively adjust pension at estate stage. It has not surfaced as a major issue. In many cases the details of each individual estate are problematic. The Department often requires a great deal of clarification from the personal representative before a conclusion is reached. That, of itself, has not surfaced as a major issue in the past.

Deputy S. Ryan

This afternoon we heard how the Department must operate within the terms of the legislation. We currently have a major problem in regard to nursing homes because either the officials or the Minister of the day did not listen to recommendations made by the Ombudsman and other people. It is all right saying it relates to only a small number of people but even one person would give rise to an anomaly. The more I hear of this matter, the more I realise it is an anomaly in the sense that the Department has never notified people of the clawback policy. Mr. Hanson has acknowledged that the Department has now come around to notifying people.

In 1997 the then Ombudsman, Mr. Kevin Murphy, stated that particular attention should be paid to ensuring the public was aware of this matter and the penalties imposed. That view goes back to 1997. The imperative on the Department to make information known to the public is also established in EU legislation. I compliment Mr. Moran on bringing this to my attention. In regard to the lack of information provided by the Department, Mr. Murphy stated that given the complexity of social insurance in general and that people of all backgrounds are liable to be ill-informed in regard to it, the Department had not adequately published the penalties in operation in the case of contributory pension claims made later. He further stated that the penalty imposed in the case of late claims was not something which had been particularly well publicised. The Department has taken action against people who did not know the requirements or the effect of that scheme. On the basis of the Ombudsman's comments the Department should have brought this to the attention of all non-contributory old age pensioners. The Department acknowledged today that this should have been done and that it will be done. The Department was wrong in discriminating and taking the clawback from the small number of people involved who were not given the necessary information by the Department that was available to it through the Ombudsman's office.

Mr. Wilson

Deputy Ryan has criticised us for not taking sufficient action on this issue. As I stated in reply to a question from the Chairman or Deputy Stanton, as to whether we were aware of this issue, I suppose it had not surfaced to us as an issue.

Deputy S. Ryan

The Department was informed in 1997 by the Ombudsman.

Mr. Wilson

The issues in that case related to late claims of contributory pension. At the time we took steps in terms of regulation and publicity. It has been a long-standing policy. The pension Acts which we operate originated in 1908. A policy of means testing has been embedded in the old age pension scheme for nearly a century. It is extremely well known to all applicants that there is a means test and that they are expected to be honest and co-operate with the Department and its inspectors in that process. No new legislative or administrative policy has been applied by our Department to penalise people in that regard. As I recall, around the late 1990s we issued a set of newsletters to the entire population of pensioners.

Mr. Hanson

It was October 1999.

Mr. Wilson

As part of a major drive on customer service we published a raft of information relating to all aspects of pension entitlements which we posted to every pensioner in the country. I remember the specific issues addressed. We took care in how we dealt with the issues relating to the situation after their death. One has to tread a very thin line in terms of sensitivity because we are dealing with people in their advancing years. We did not wish to be overly threatening or to worry them but we had to be clear about the implications. We made a great effort to incorporate statements which sensitively addressed what would happen in terms of their estates and what they should do in this regard. We were sensitive to that general theme. When dealing with older, vulnerable people one does not want to constantly harass them about means assessments and remind them of their imminent demise and the implications of that. A great deal of effort was put into the capital means tables and the publicity relating to that and into our normal channels of information. Our freedom of information guidelines also contain them. In general terms we would defend the information available to the public. A number of Deputies made comments about us publicising the matter further. We will note that and do something about it if we can in terms of direct publicity.

Chairman

The more I hear, the more meritorious I consider my proposal in terms of getting around many of the emerging difficulties. I thank the delegation, Mr. Wilson, Mr. Moynihan, Mr. Hanson and Mr. McGinley, for attending and for spending a considerable amount of time answering questions on various matters, some of which were outside their remit. We are grateful for that. As senior officials, they anticipated that they could be asked about matters that are not directly relevant to the point at issue. We would appreciate if details on any outstanding issues could be sent to the clerk. The document we have received will be most helpful to us in explaining matters to people. We appreciate that the delegation appeared before the committee at relatively short notice, and that some members had to travel a considerable distance. I also thank Mr. Moran for attending today.

The joint committee adjourned at 5.12 p.m. until 3 p.m. on Tuesday, 14 June 2005.