Older people who save their weekly social welfare pensions are being "penalised" by having their pension reduced or their savings clawed back by the State when they die.
Individuals applying for a non-contributory pension are required to declare property or other assets above a means threshold of €12,700 to determine their eligibility for the pension.
However, the Department of Social and Family Affairs includes social welfare pension income that accumulates as savings when calculating an older person's means.
The practice means that many of the 85,000 recipients of non-contributory pensions who allow their savings to build up in excess of €12,700 - or €20,000 from June this year - face having their pension reduced or their savings clawed back by the State when they die.
New figures show that since 2000 the Department of Social and Family Affairs has recovered some €25 million in "overpayments" from the estates of 2,079 individuals.
In one case, details of which have been seen by The Irish Times, the department is trying to recover €33,700 from the will of a 93-year-old man who saved €42,000 by saving almost half of his non-contributory pension each week.
There is no specific warning on official leaflets and guidelines regarding social welfare entitlements that non-contributory pension income that accumulates as savings may affect a pensioner's means.
Internal records released under the Freedom of Information Act show that department officials are aware that older people may not be aware of the practice, and that changes to official leaflets are planned "as soon as possible".
Opposition parties and support groups for older people criticised the practice yesterday, and said older people were being penalised for saving.
Paul Murray, of Age Action Ireland, said: "It's a terrible pity that people who have very little and try to save are being penalised.
"These are people on very low incomes. To take money from people who have saved what they can from the pension is very unfair."
Fine Gael spokesman on social and family affairs David Stanton called for the law to be changed to exempt non-contributory pension savings from means testing.
"I think that if old people who are the least well-off in society live frugally and thriftily, they shouldn't be penalised. By regulation, there should be exemptions made for these people if their savings can be proved to be solely from non-contributory pensions or widow's pensions."
Minister for Social and Family Affairs Séamus Brennan said means-testing rules regarding the non-contributory pension were under review, but was unable to say if there would be any changes.
A spokesman added that, in the meantime, means-testing thresholds for the non-contributory pensions were due to be substantially increased to ensure SSIA savings did not affect older people's pension payments.
Referring to the SSIA changes late last year, the Minister said: "I want to ensure that the social welfare, means-testing arrangements do not act as a disincentive to claimants to become savers, or to harshly penalise those who have been regular savers in the past."
Figures show there are 85,381 people receiving an old age non-contributory pension, along with 15,488 people receiving a widow's non-contributory pension.