Savings and the State Pension (Non-Contributory)

[Marica]

My aunt gets the State Pension (Non-Contributory). When she was means-tested she qualified for payment at the full rate as she had no other income and her savings were well below the threshold to qualify as means. Like many older people she lives fairly frugally and and has always managed to put away some of her pension every week to cover unexpected or irregular expenses and, of course, to pay for her funeral. She is now just out of hospital after 15 weeks and during this time her pension was being lodged in her bank account but apart from a small amount for household bills it was not being spent.

The DSFA's booklet on the NC pension states that they expect you to spend your pension as it should just cover basic living expenses and that if you save some of it these savings will be counted as means and could result in your pension being reduced or even withdrawn. Scary stuff. My aunt is now terrified that they'll find out she hasn't been spending all of it and reduce her payment, so she is now collecting her money and keeping it in cash in her house. While she's still below the means threshold, she's not far off it and another spell in hospital or a year's more savings could push her over it, so her reluctance to bank it is kind of understandable.

Question: Does anyone know if the DSFA actually enforce this rule on people saving money from their NC pensions and if so how they do it? Do they randomly means-test people again or how would they know that some of the money is being saved? I really need to put her mind at rest and convince her that keeping cash at home is not the best option.

The contributory pension is less than €10 a week higher than the non-contributory, but there is no restriction on recipients of this pension saving some of their weekly payment. Seems a bit unfair that elderly people on the non-contributory pension could be penalised for managing their money well and putting some aside to cover expenses they might incur later on in their lives. No wonder so many of them hoard cash at home...

 

[Welfarite]

Pensions can be reviewed at any time, or randomly as you say. However, it is very unlikely that SW would review a pension unless something triggered this review, in my experience. What I mean by "trigger" is when a spouse becomes pension age and claims in their own right or another pension kicks in. Savings alone would not trigger a review. The unwritten rule is to leave old age pensioners alone due to their vulnerability and to stop them doing exactly what your aunt is doing...keeping money in the house. Also, if savings go slightly above the threshold, the pension does not cease.
See this:

Weekly Means Assessed:

First €20,000 Nil reduction

next €20,000 - €30,000 reduces pension €1 per €1,000

next €30,000 - €40,000 reduces pension by €2 per €1,000

Over €40,000 reduces pension by€4 per €1,000

So you would have to have a lot of savings to lose the whole pension. One point to note that if a person does not declare assets or savings and subsequently dies, the state will go after the estate of the person to recover pension paid that was not due. This in effect is areview iof entitlements in retrospect, after death.

 

[pat127]

The contributory pension is less than €10 a week higher than the non-contributory, but there is no restriction on recipients of this pension saving some of their weekly payment. Seems a bit unfair that elderly people on the non-contributory pension could be penalised for managing their money well and putting some aside to cover expenses they might incur later on in their lives. No wonder so many of them hoard cash at home...

I can fully understand how you feel and I agree that it does seem unfair that people should be penalised for being frugal but it's not appropriate to compare the Contributory with the non-Contributory. The former is effectively an assurance policy, one that is guaranteed to pay out once you make the necessary contributions. How you spend it is entirely your own business.

People should know that when a Will goes to Probate and savings such as your Aunt's exist, Welfare can then claim compensation.

 

[Marica]

She declared everything she had at the time she was assessed for eligibility and was well under the means threshold - what she's really worried about is the money she's saved out of her pension since then and also the fact that she might appear to be managing too well on it. What she has saved now is basically enough to pay for her funeral, maybe get her cataracts done privately if she needs to and get occasional repair work done to her very old house. There won't be a lot left in her estate when she's gone.

I have never heard or seen advice that pensioners are expected to spend their pensions.

It says it here in the DSFA's information booklet SW116: http://www.welfare.ie/publications/sw116.html. This is what it says:
Note: If you qualify for State Pension (Non-Contributory), the rate of payment you receive will be set at a level that should enable you to have an adequate standard of living. The Department would expect you to spend all or most of your pension each week in meeting your normal day-to-day living expenses.
However, if you choose to save part of your pension, those savings will be means-tested in the same way as savings from any other source (for example, from earnings, from an occupational pension or from an inheritance).
Depending on the amount of savings you accumulate from all sources, this could result in a reduction in (or withdrawal of) your State Pension (Non-Contributory).

If the DSFA don't really mean it, then maybe they shouldn't say it as it really does send out the wrong message to vulnerable older people.

Unfortunately, like many older people who worked most of their lives on small farms and then had to look after their elderly parents and later their siblings, my aunt didn't get the opportunity to pay PRSI and qualify for a contributory pension. The gap between the contributory and non-contributory rates has been narrowing over the past few years and with less than €10 in the difference now it's a bit unfair to tell people on one payment they can do what they like with it but tell people on the other that they should be spending most of it, when their lifestyles and outgoings are unlikely to be very much different.

 

[Welfarite]

Yes, Marica, after I found that note on the guidelines, i edited my post and took out my comment! Sorry for doubting you!

Bottom line here, from what you've said, is that you aunt does not have a fortune saved. It's irrelevant where it came came adn Sw can't just turn around and take it form her, saying "you're not spending your pension".
You can work out how much she would lose off her pension from my figures above, if any. Example, if she has 30k saved, she will lose about a tenner a week.

 

[Marica]

Thanks for that. I will try and convince her that it's still ok for her to put her pension in the bank every week and withdraw only what she needs for her weekly expenses. She's very independent and has always been determined to set money aside so that in the future she can pay for whatever is necessary for her to keep living independently as long as she can. If as you say there is an unwritten rule in DSFA that pensioners are left alone, then hopefully I can put her mind at rest and persuade her that it's unlikely that Seamus Brennan is going to take her pension away to punish her for being prudent!

 

[Welfarite]

Another thought about the ambigous "information" and how your aunt interpreted it: You might like to comment on the fact that the note about spending pensions/means tested savings/losing pension gives the wrong impression and that the statements should be structured better. You can do that on the website.