Making sense of the means test for my pension

Q&A:I am a separated person who will not qualify for the contributory pension you wrote about a couple of weeks ago. I will be 66 in February 2013 and cannot seem to get any clear answers as to means testing for a non-contributory pension. I have sold the family home to downsize and gather that some of the amount which is invested does not count as part of a means test. Is this correct?

What is the maximum amount that I can have in investments?

Where and how do I go about looking for this information

Ms A.F., Dublin

The non-contributory State pension is provided to people who do not have sufficient social insurance contributions (PRSI stamps) during their adult lives to qualify for a contributory pension.

At the heart of the non-contributory pension is the means test as the payment is paid according to financial means, or need.

There are three main elements to the means test. They are:

* cash income, such as earnings from employment;

* value of capital, which includes investments and savings, and;

* income from property personally used, such as renting out a room in your home.

On cash income, the starting point is that any cash income you receive is taken into account in the means test. This includes, as I said, earnings from a job, but also any maintenance you may be in receipt of from your separated partner or spouse and any money from a state pension in another country.

For means test purposes, the relevant income is what you expect to earn in the next year; if that’s not practicable, they generally work off your previous year’s earnings.

As you mention you are separated, I should probably go into some detail on assessment of maintenance payments.

As stated above maintenance payments are subject to assessment. However, you can deduct up to a maximum of €95.23 weekly for housing costs, such as rent or mortgage payments. You will be asked for evidence of these costs.

Thereafter, half the outstanding balance of your weekly maintenance payment is assessed as income; the other half is disregarded.

If that sounds complicated, things get even more convoluted when you start delving into the other income exceptions.

On the cash side, the main one is that the test does not take into consideration net weekly earnings from employment of up to €200. Net weekly earnings mean earnings after allowing for any PRSI payments as well as superannuation/PRSA contributions and union dues.

Further confusing matters is that this only comes into play if you are working for someone else. If you are self-employed, there is no allowance made for the first €200 of earnings.

In this case all you can disregard is expenses related to the self-employment.

Other income that is not taken into account, or more accurately, is disregarded in assessing means including any payment from the Department of Social Protection – i.e. any welfare payment.