The main features of Budget 2013 have been well and truly gone over by most of the media, but you might be a little surprised about a few of its hidden “attractions,” or by a few additions or subtractions to it that may yet appear next February/March when the Finance Bill is introduced to tie off the loose ends.
For the first time since these austerity budgets were introduced, older people, especially wealthy pensioners, have found themselves pretty squarely in the government’s crosshairs.
The main measures that affect this age group include the trebling of prescription charges; the raising of the income threshold for both the payment of the universal social charge by over-70s and for qualification of the over-70s medical card; the 10% hike in capital taxes such as DIRT, CGT and CAT; the lowering of the home respite benefit and the adjustments to the household benefit package.
While all of these changes will undoubtedly cut the income or savings of older people, benefits that were left alone include the state pension rates and the bulk of the household benefits. One that was hit was the telephone allowance, but with an increasing number of older people opting to have mobile phones as well as their landline, it seems incongruous for the taxpayer to keep wholly subsidising this benefit.
Means testing is something that is likely to keep being introduced in future budgets due to anomalies like this one. Why, for example, do elderly people who can afford a run a private car receive free state bus and rail passes? (Why should wealthy parents be recipients of child benefit if its purpose is to assist low-income families or those in need?)
The means-testing quandary is likely to extend in the future to questions such as: Why should someone who can afford private health insurance – and one in five of all private health insurance members are over 60 and purchase the most expensive plans – also qualify for a free medical card (or GP-only card now) with annual income up to €30,000 for an individual or €60,000 for a couple? (These are the new income thresholds, down from €36,000 and €72,000.)
Pensioners on fixed incomes are particularly vulnerable to cost-of-living inflation and the politicians are aware of this. Inflation is just another hidden tax, but it permits politicians to get away (up to a point) in being able to avoid actually cutting pension payments. Freezing them for three years allows inflation to do the cutting.
The only way low-income pensioners can offset the real cost of the freezing of your pension, the cuts to the household package or higher prescription charges is to try to find savings in your own spending or seek higher returns from any savings or other assets you may have.
Here are a few practical solutions to do just that:
Shop around for better utility charges. Check out www.bonkers.ie for best fuel, electricity and telecoms costs. You fill out your existing bill details and they come up with alternative, cheaper providers.
You can also compare your deposit rates on www.bonkers.ie or the National Consumer Agency website, www.nca.ie. If you earn less than €18,000 (€36,000 for a couple), you are exempt from DIRT at source.
Review your health insurance and if possible switch to a similar, cheaper “corporate” product or new provider before next March when higher risk equalisation payments are expected to be imposed by the government. Check out www.healthinsurancesavings.ie.
The government has not amended or withdrawn the Rent-a-Room Scheme, which allows anyone with a spare room(s) to rent to earn up to €10,000 tax-free. If you live alone, the rental income will have no impact on any means-tested social welfare benefits you receive.
Consider selling/auctioning household goods, antiques, jewellery and other items that you don’t use or need. There may be a real treasure lurking in that sideboard or attic. Local auction salesrooms, collectible and antique shows, car-boot sales, eBay and other online sites are all good ways to earn a little money by selling things you no longer want or need.
Pensioners on the income margins for the purposes of paying the new property tax next year (€15,000 gross for a single person and €25,000 for a couple) should speak to a tax adviser about how to adjust their income so that it may qualify for the property tax deferral. (Spending some capital on insulating your home may result in loss of deposit earnings, but may be well spent if it saves fuel costs and improves your health.)
Finally, one change that has received practically no coverage is the increase in the terms for the Fair Deal nursing home scheme.
Up to now, the person availing of the scheme and taking up a nursing home place was required to contribute 80% of their annual pension income plus 5% of the value of other assets (usually the family home) for a maximum of three years. Upon the person’s death, their estate would pay over this cumulative 15% asset value.
Budget 2013 has increased this amount to 22% and sets the precedent to increase it further for the next two austerity budgets in 2014 and 2015.
Next week… Be prepared: Budget 2013 coping strategies for families.