Good fortune comes at a price when you’re disabled

My daughter received payment for a medical error case from the hospital’s insurance. While I understand that this payment is not taxable, I’m concerned if it might impact her disability allowance, particularly in the means test.

I came across your article on possible compensation for cervical check cases which is exempted from the means test, but I’m uncertain if it applies to other personal injury payments as well.

My daughter endured a catastrophic brain injury, which has left her incapacitated on one side.

Ms T.R.

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Having a child suffer a catastrophic disability is horror enough for any parent without having to worry about whether the little support they get from the State is vulnerable. But such is the nature of welfare support, tightly constrained as it is by rules to avoid potential for abuse.

Yours is one of two queries that have landed on my desk in recent weeks on the issue of the disability allowance. Both show the uncertainty people have about what the rules in place are, and concern about how a bit of good fortune could actually be counterproductive for loved ones.

In your daughter’s case, I assume her disability relates to that catastrophic brain injury she suffered in the hospital. It is clearly entirely appropriate that she should be compensated by the hospital for any wrongdoing that led to that injury, which is either entirely responsible for her disability or which exacerbated an existing disability.

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But it does raise a concern about where she will stand with the rules on disability allowance.

The allowance is paid at a maximum weekly rate of €220 to anyone between the ages of 16 and 66 whose condition has been in place for a year or is expected to continue for a year. The payment is exempt from income tax, PRSI or the universal social charge.

The means test rules on capital for the disability allowance are more generous than for most other welfare payments in that they do not take into account the first €50,000 of savings

It can relate to an injury or disease, a physical disability or a mental one. When you apply for the allowance, you give the authority permission to approach your doctor for a medical assessment to substantiate your claim. This is assessed by the Department of Social Protection’s in-house medical assessors.

The disability must substantially restrict the work that the person could otherwise do, given their age and qualifications or experience.

For those at the younger end of the age spectrum, if you are in school at the time, you can continue with your education. At the other end, once you hit 66, you move on to the non-contributory State pension.

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Finally, and critically, to be eligible for the allowance, you have to satisfy a means test. This looks at both your income, if any, and also your capital – in other words, any savings or other assets that you own.

The assessment of your income will not look at any welfare income that you are receiving. Certain other State payments are also excluded – a full list is available here. Where relevant, any rent you receive from a second property you own will be ignored provided the capital value of the building has been assessed on the capital side of the means test.

Then we come to the issue of compensation payments. Here, the department provides a very specific list of payments that are excluded from the calculation. They include payments by a tribunal or court in relation to contracting hepatitis C, as well as victims of Thalidomide, ex gratia payments proposed by the Cervical Check Screening Programme scoping inquiry or subsequent income for cervical cancer patients under support measures set up in 2018. The same is true of the Surgical Symphysiotomy Ex Gratia Payment Scheme and for those who, since October 2020, received ex gratia payments over the Pandemrix flu vaccine.

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Payments from the Residential Institutions Redress Board or the Residential Institutions Statutory Fund Board or those made to women following publication of the Magdalen Commission Report are also exempt, as are payments made under the Lourdes Hospital Redress Scheme 2007 or the Lourdes Hospital Payment Scheme. People who received compensation over the Kerry CAMHS will not have that money included.

Those who got money under the Stardust Victims Compensation Scheme are not required to take account of that money. The same is true of people who got money under the Victims and Survivors (Northern Ireland) Order 2006 or under the 2020 Troubles Permanent Disablement Payment Scheme (Northern Ireland).

As you can see, this is a very detailed and precise list. More importantly, from your viewpoint, it does not include insurance payouts over hospital malpractice claims, unfair as that may seem.

I checked with the Department of Social Protection to make sure we had the most up-to-date position. It confirmed that compensation payments such as that received by your daughter are generally treated as capital for means-testing purposes.

The means test rules on capital for the disability allowance are more generous than for most other welfare payments in that they do not take into account the first €50,000 of savings where the normal disregard is only for €20,000. However, though you do not detail your daughter’s payment, in the case of such a debilitating injury, it is likely to be significantly above that figure.

Over that €50,000 figure, your daughter is considered to have weekly income of €1 for every €1,000 up to €60,000, €2 per €1,000 over that number up to €70,000, and €4 per thousand euro above the €70,000 level.

Let’s assume your daughter’s payment was €100,000. Under the means test, that would create weekly income of €150, reducing her disability allowance payment from €220 to €70 a week.

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It does all seem terribly unfair that she needs the allowance because of something that befell her, and yet she will be penalised for being compensated over that injury.

The thinking obviously is that if people have savings, they can earn an income from that money. But if you take that €4 per €1,000 notional income from savings of more than €70,000, that would mean annual income of €208 from the €1,000 – or a return of over 20 per cent on your investment. Good luck finding that. Even the €1 per €1,000 would equate to an income yield of over 5 per cent.

The one relief is that your income is not taken into account, even where your daughter is living with you

Clearly, anything she has received in compensation will dissipate over time in catering for her medical and other needs and she will eventually work back to entitlement to the full allowance. But the one thing parents dread most is what happens to their children if they are no longer around to help or care for them. The compensation is supposed to provide that peace of mind – the rules of disability allowance dictate otherwise.

The one relief is that your income is not taken into account, even where your daughter is living with you. In addition, if she is able to work at any point, the first €165 of weekly earnings after PRSI, pension contributions and union dues, if any, would be exempt from the means test. Half of anything she earns between €165 and €375 a week would also be disregarded.

One last thing. The department told me it was currently carrying out a full review of means tests, including what it calls capital disregards – amounts not included in the means testing of savings. Any changes in those rules would generally be announced in a budget and covered by post-budget legislation.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice