December 2007

Welfare and Pensions Column

War Disablement Pensions

Are you in receipt of a War Disablement Pension and saving it for a rainy day?

There is no reason why you should not save some of that income to help pay for larger necessities in life, like the new fridge that is needed because the old one is not going to last much longer, or you are going to need a more modern car to get to the shops, or even that luxury of a holiday in the sunshine.

You should all know that War Disablement Pensions are tax-free and are not counted as income for the vast majority of Work & Income benefits and allowances.

The problems start when the money is placed in a savings account or an investment; then tax must be paid on the interest earned. Some people think that this also should be tax-free. The simple truth is that it can’t be because the interest is NOT a War Disablement Pension.

The next problem that can arise is when you have been saving your War Disablement Pension and need to go into a rest home or a veterans’ home because you can no longer take good care of yourself in your own home.

You need the extra care that is only available all the time in a rest home. If the savings you have made have taken you over the assets limit you will be asked to pay in full as a private patient until such time as your assets reduce to the limit.

The current limits are $170,000.00 for a single person or where both partners of a couple are in a rest home. For a couple where one partner lives in the community and the other in a rest home you can elect to go for either $75,000.00, excluding the value of the family home, where your partner still resides, and car, or $170,000.00 including the value of the family home and car.

This is the way to go if you have a house where the partner in the community is going to live and that is not worth very much, or you live in a rental property; and in each case you either do not have a car, or again it is not going to take you over the limit.

Please remember that these limits increase by $10,000.00 each July. If you have assets exceeding the limits you are probably going to be using your capital to help pay for the rest home, so you will need to keep any eye on the money that is being paid out in relation to the amount of assets you have.

You are also able to make small monetary gifts but these are very much less than the tax man allows you to give away.

Regarding rest homes you also need to remember that if you have other income such as a private or occupational pension this will need to be taken into account on the income part of the means test once you have reached the asset limit and some will be used to pay some of the fees.

If you have any queries about the asset and income tests you should call the Residential Care Subsidy Call centre on 0800 999 779.