For those attending the committee who have not been part of recent discussions on this and for those from the outside considering this committee's deliberations, it is important for me to emphasise again that I have asked and encouraged Deputy O'Keefe who is leading a campaign in this respect to talk to my officials. I wrote to him today and gave him the names of two people who would explain to him exactly why my predecessor Proinsias De Rossa - aided and abetted by Deputy Durkan - established this system and why, to this day, the system is not out of date, even given that interest rates have come down. I know Deputy O'Keefe has pedalled this to some of his colleagues, one of whom wrote a very unhelpful article in a provincial newspaper - there are probably more around the country which I have not seen - trying to frighten old people by referring to the figures of 7.5 per cent and 15 per cent, which I emphasise were not picked by me. They were picked by my predecessor.
Quoting those figures does not let people know that there are built-in disregards in the system which mean that - and this was stated by Deputy De Rossa at the time - the vast majority of people coming under this system are at an effective rate of only 3 per cent, not 7.5 or 15 per cent.
As I stated before, to get to the effective assessment rate, account must be taken of the significant capital disregard provided of £2,000. In addition, other aspects of the means-test when they interact with the assessment formula operate to further reduce the effective assessment rates. For instance, in the case of old age and widows pensioners, the first £6 of weekly assessable means do not affect entitlement to payment. In the case of a couple, means are taken to be half of the joint net means. These result in a couple being able to have double the amount of means a single pensioner can have. That was the reason why this system, complicated as it is, was put in place by my predecessor.
In effect, a married couple can have capital up to £12,320 and still qualify for the maximum pension. Furthermore, a single pensioner can have up to £38,348 in capital - that will be £40,428 from June - and qualify for the minimum rate of pension. A married couple can have up to £76,000 - or £80,000 from June - before losing entitlement to pension. The vast majority of old age pensioners within our system have no capital or insufficient means to even be assessed for means-test purposes. We estimate that only a small minority would have capital in excess of £20,000. In effect, a couple with capital of £20,000 would be assessed with means of only £600, giving an effective rate of only 3 per cent as I stated earlier.
I will repeat figures which have been checked since Deputy O'Keeffe raised this matter last week in a debate during questions. He referred to an interest rate of 0.2 per cent on deposits. If we were to reduce the assessment rates of 7.5 and 15 per cent to a combined 2.2 per cent and retain the £2,000 disregard, it would have the following effects on the amounts of capital pensioners may have and still qualify for a pension. A single old age pensioner would be able to receive a maximum pension while holding capital of £158,000. A married couple would be able to receive a maximum pension while holding capital of £316,000. If the disregard is not retained the figures are even more stark.
We have made a comparison with provisions in the UK and the note I have reads:
The capital assessment provisions, which are currently in operation in this country, compare very favourably with those in operation in the UK. For instance, under the income support scheme the equivalent means tested payment for pensioners in the UK, capital of up to £3,000 is ignored. Income support is reduced on a sliding scale where a pensioner has capital of between £3,000 and £8,000, while entitlement ceases completely where the pensioner has capital in excess of only £8,000. [The figure is £12,000 in this country.] Under Irish arrangements a single old age pensioner can qualify for up to £6,100 and still qualify for the maximum pension, over twice the equivalent amount under the UK system. A married old age non-contributory pensioner couple can have over four times the equivalent UK amount, that is £12,320, and still qualify for the maximum payment. Indeed, the amount of capital which the Irish pensioner couple can have and still qualify for the maximum pension is substantially in excess of the level at which payment could be withdrawn completely under the UK system.
Furthermore, a single old age non-contributory pensioner can have capital of up to £38,345 and still qualify for a reduced rate pension, nearly five times the maximum amount of capital allowed under the UK system. This maximum level of capital will increase to £40,428 following the implementation of the Budget increases in June. A pensioner couple can have capital of up to £76,000 or £80,856 from June and still qualify for a reduced rate, nearly ten times the maximum amount of capital allowed in the UK system. Under the income support scheme, the payment is reduced by £1 for each amount of capital of £250 in excess of the £3,000, subject to the payment being totally withdrawn where the capital is in excess of £8,000. Under the Irish system, for amounts of capital up to £20,000, payment is reduced by £2 for each amount of capital of £1,387 in the case of a single pensioner and by £2 for each amount of capital of £2,773 in the case of a pensioner couple.
I read that into the record so that Members can check the figures.
The outrageous headlines have been peddled in this instance and, in effect, they sow the seeds of uncertainty in the minds of old age pensioners. I accept that the figures of 7.5 per cent and 15 per cent may look stark to people who do not understand how the system operates by taking into account the disregards built into the system.
While I believe this is a good system, we will look at it to see if we can achieve the same results while making it look better. However, any change in the 7.5 per cent and 15 per cent figures, without changing the disregards will skew the system and result in people with large capital receiving a maximum pension which, in effect, will dissipate the amount of State funds available under the social welfare system.