On the question of SSIAs, late last year I asked my officials to review it in time for the budget because Deputies raised the matter with me in the House. We were pleased to announce in the budget that the capital disregard would be increased to €20,000, an increase of €7,300, which is substantial and applies to all capital, regardless of where it is held. It applies to capital held in an SSIA account, credit union, post office or bank account. The €7,300 increase in the capital disregard was meant to deal with those for whom their only means was the SSIA.
I am not exempting the SSIAs per se on their own. The new arrangements will mean that a single non-contributory pensioner with no other means can have capital of up to €28,000 and still qualify for a pension at the maximum rate. The figure is doubled for pensioner couples. These improvements will come into effect in June. The increase in the carer’s allowance will come into effect in April. The scheme is designed so that it does not act as a disincentive to saving. If a claimant has been contributing the maximum monthly amount to the SSIA scheme, on maturing it will yield somewhat less than €20,000. That is why I selected €20,000 as the new disregard. To repeat, social welfare recipients who have no other means except the capital in the SSIA account will not be affected in any way.
Under the new arrangements, capital up to €20,000 will be disregarded from assessment. All those with capital above €20,000 will see a reduction in the level of weekly means assessed. The average reduction in weekly means on capital up to €76,000, or double in the case of a pensioner couple, is €12.20 per week. Deputies may wish to avail of a table that shows the current and new assessment of capital, rising by increments of €1,000. It also shows the reduction in weekly means over a wide range of capital bands.
A number of Deputies have pointed out that the ascribing of income to these new bands should be reviewed and I am looking at that. At some recent parliamentary party meeting, some Deputies raised the issue of the income ascribed to certain levels of capital and what the interest rate would have to be if one had that money in the bank. From the pensioners' point of view, the maximum value of a SSIA account before interest or investment income is taken into account is estimated to be €19,000, which is less than the income disregard of €20,000. At present a single pensioner can have capital of €20,316 and still qualify for a maximum pension. This will increase to €28,000 under these new arrangements, an increase of €7,700. In 2004, a single pensioner with capital of €68,000 still qualified for a minimum pension. As a consequence of the €12 per week increase in the weekly rate of pension, which was announced in the budget, this amount has increased to €71,105, with effect from January 2005. This will further increase from June, under the new arrangements proposed, to €76,000.
Deputy Stanton asked if payments had been made as a result of the Supreme Court decision. He mentioned a figure of €2,000. I presume Deputy Stanton wishes to have payments resulting from the Supreme Court decision disregarded from any capital assessment. It is possible to make regulation to disregard certain types of capital or income, so that could be done in this case. That would be my view, in response to his question. The Government will take an overall view and will come up with a mechanism to deal with the Supreme Court decision. In my view, it would be best to disregard it, if it is financially possible for the Exchequer to do that.
I was asked also about accrued saving in the case of persons now deceased. In cases where it is established that the deceased had means in excess of those previously declared to the Department for pension purposes, a revised decision is made on the deceased client's entitlement. An overpayment is then calculated and notified to the personal representative for recovery from the estate of the deceased. The personal representative has the right to appeal the overpayment decision to the independent social welfare appeals office.
Deputy Stanton wondered how this came to the notice of the Department and I am advised that the executor is obliged under social welfare legislation to notify the Department. In determining whether a deceased pensioner was overpaid, funeral and legal expenses and capital savings and investments to the value of €10,000 are disregarded in the first instance. In addition, a certain amount of capital is disregarded. It was €200 up to 1997 and was increased to just over €2,500 in that year. In October 2000, it was substantially increased to €12,700 and the Minister for Finance announced on budget day that it would rise to €20,000. I am assured that the Department deals with overpayments in a sensitive way.
I listened carefully to the point the Chairman and other Deputies made about double counting. It is not possible to distinguish savings that come from different sources. To illustrate the point, it is similar to saying that the Chairman pays tax on his income and he then puts all the money, on which he has paid tax, in the bank. He could make the argument that as he has already paid tax on the money, it should not be taxed a second time. However, if one buys a house or even a video with it, one will pay VAT. One continues to pay tax. If the principle was adopted that a pound was taxed once and never again, it would cause havoc in the entire financial system. If a pensioner saves money from his or her pension and puts it away, it becomes capital. It is the same as when somebody saves money from his or her salary. Pension income is a person's income.
I do not know how one would create a structure where one would exempt all pension savings. One would then have to deal with people's savings from non-pension income and compare them to savings from pension income. An army of accountants would be required to figure out which €100 was saved from the pension and which was won on the dogs or horses. It would be a problem. It is a nice idea but we must stick with the principle that capital is capital, regardless of where it originates.
I set out last October to exempt SSIAs per se because we encourage people to save money in them. I took the view that we should exempt them. However, when I read and studied the material, the concept became a nightmare. What was I to say to people who had saved money in credit unions? Was I to say the credit unions should be different? We kept coming back to the same principle, probably the most sensible, that regardless of where one gets one’s capital from, whether one saves it, earns it or collects it, all sources should be treated the same. We have accounted for the SSIAs by raising the disregard substantially to above what one would get from one’s SSIA.