Navigating the Fair Deal Scheme and Your Approved Retirement Fund (ARF)
The Irish Fair Deal scheme, officially known as the Nursing Home Support Scheme, aims to assist individuals with the costs of long-term nursing home care. However, understanding how it interacts with retirement funds, particularly Approved Retirement Funds (ARFs), can be complex. Recent queries highlight confusion around whether both the value of an ARF and the income drawn from it are factored into the financial assessment.
How the HSE Assesses Your Finances
The Health Service Executive (HSE) conducts a thorough financial assessment to determine your contribution towards nursing home fees. This assessment considers both your income and your assets. For a single person, 80% of assessable income and 7.5% of assets are applied annually towards the cost of care. For couples, where one partner requires nursing home care while the other remains at home, these percentages are halved to 40% and 3.75% respectively.
What Counts as Income and Assets?
Assessable income includes pensions, social welfare payments, dividends, bank interest, and rental income. Crucially, certain deductions are allowed, including income tax, Universal Social Charge (USC), health charges, mortgage interest, and local property tax. Support payments for children in full-time education are also excluded. Rental income from a family home while in nursing care is now exempt.
Assets encompass savings, stocks, bonds, and property, including the family home. However, the first €72,000 of assets is exempt for couples, and €36,000 for single individuals. The family home is included in the assessment, but only for a maximum of three years, capped at 22.5% of its value.
ARFs and the Fair Deal Scheme: Clearing Up the Confusion
The key takeaway regarding ARFs is that they are treated as a cash asset. The HSE values the fund at the time of application and applies the 7.5% (or 3.75% for couples) annual charge against that value. However, the income you draw down from the ARF is not double-counted. This means the amount you withdraw as income is not added on top of the asset valuation for contribution calculations.
This clarifies a common misconception – you won’t be losing 40% of your ARF income in addition to the asset-based contribution. The HSE acknowledges that the income drawdown is already reflected in the ARF’s overall value.
Can You Avoid Asset Assessment with an Annuity?
One way to avoid having your pension assessed as an asset is to convert your ARF into an annuity. However, this isn’t always financially advantageous, given recent concerns about annuity value. Income from an annuity, after tax and other exemptions, would then be subject to the 40% charge.
Will You Even Qualify for Fair Deal?
It’s important to note that you may not qualify for Fair Deal if your total assessable income and assets already cover the full cost of nursing home care. The scheme is designed to subsidize costs, so if your financial resources are sufficient, you won’t receive support.
Pro Tip
Request a financial review from the HSE no sooner than 12 months after a previous assessment. This ensures your contribution is based on the most current asset valuation and income levels.
Frequently Asked Questions
- Is my ARF fully assessed? No, the first €36,000 (single) or €72,000 (couple) of your assets are exempt.
- Is income from my ARF double-taxed? No, the income drawn down is not added on top of the ARF asset valuation.
- How long is my home included in the assessment? Your home is included for a maximum of three years, capped at 22.5% of its value.
- Can I appeal the HSE’s assessment? Yes, you have the right to appeal the financial assessment if you disagree with the outcome.
Please send your queries to Dominic Coyle, Q&. A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to [email protected] with a contact phone number. This column is a reader service and is not intended to replace professional advice.
Explore further: Read more about the Fair Deal scheme on the HSE website.
