Same old story? Not likely this budget
This package has two main qualifying criteria: those over 66 in receipt of social welfare pensions or meeting a means test; and everyone over 70 regardless of means. It covers the following:
* One of electricity (normal standing charges and an allowance of up to 400 units of electricity per bi-monthly billing period), or gas (normal standing charges and an allowance for a certain amount of gas per billing period), or bottled gas (15 vouchers for a free gas cylinder between September and April and four vouchers from April to September).
* A free annual TV licence.
* Free telephone rental and €20.42 plus VAT towards calls in each two-month call period.
While the IMF acknowledged that the annual cost of this scheme at €0.5 billion is “small”, it noted that it is “rising rapidly” due to ageing.
* Means-test the scheme.
A contributory pension of €230.30 a week, or €11,975.60 a year, is paid to about 80 per cent of pensioners in Ireland. It is not means tested, and is currently about 5 per cent higher than the non-contributory pension, which is paid to those who do not qualify for a contributory pension.
Given that those who get a contributory pension do so on the basis of meeting the PRSI contribution requirements, such pensioners are more likely to have other income, such as an occupational pension. In this regard, the IMF has suggested the contributory and non-contributory pensions could be brought to the same level.
While the Government may be reluctant to change such a headline rate, there is some precedence for doing so. Last year, it reduced the contributory rate for those with less than 48 annual PRSI payments to a top rate of €225.80, declining further depending on the number of contributions.
* €3.6 billion
* Reduce the state pension to bring it to the level of a noncontributory pension, at €219 a week.
Pensioners have a much more favourable tax treatment than others. Those over 66, for example, pay no PRSI, which is currently levied at a rate of 4 per cent, while pensioners can earn up to €18,000 for an individual or €36,000 for a couple without paying any income tax. They are also entitled to an age tax credit of €245 per person, or €490 per couple.
In addition, those over-70 pay a universal social charge (USC) at 2 per cent on the first €10,036 of income and 4 per cent on everything above this. Everyone else pays 7 per cent on income above €16,016.
The age tax credit for 2009 cost €44 million. For the same year, age exemption cost €82 million.
* There are many options available to Government to try to claw back some revenues from pensioners, including introducing PRSI for pensioners, lowering their tax-free bands or increasing their USC.