Overseas Pension

From Alec Waugh

At the recent Auckland Business School Seminar “Does the UK’s reform of pensions have lessons for NZ, I was approached by Bob Stevens, who told me Kaspanz needed to be stronger on Overseas Pension reform in relation to NZ Superannuation.

Kaspanz strongly supports a review of the current formula and approach adopted, specifically Section 70 of the Social Securities Act.

This opinion piece by Michael Little wood sums up the issue, and hopefully assists Bob Stevens to realise Kaspanz wants the issue addressed

OPINION: New Zealanders are entitled to New Zealand Superannuation from age 65 if they have lived here for at least 10 years after age 20, with five of those years being after age 50.

However, if they have a state pension from another country, the Ministry of Social Development will deduct that pension under section 70 of the Social Security Act, if it decides the overseas pension is similar to New Zealand Super.

The idea is that someone shouldn’t receive two full “basic pensions”, especially as New Zealand Super has an unusually short qualification period – just 10 years.

There has been something like section 70 since 1938.

The ministry has looked at the section several times over the years but it hasn’t changed and is now strengthening its enforcement of section 70 deductions.

The Retirement Policy and Research Centre has been looking at section 70 for four years.

Apart from the Government, everyone, including the retirement commissioner thinks that section 70 needs to change.

It no longer copes with an increasingly mobile workforce; it is inconsistent with the way New Zealand treats superannuitants who leave New Zealand; it is opaque and, in some respects, just plain wrong.

The Government is entitled to acknowledge in some way pensions that are payable by other governments and do a similar job to New Zealand Super.

We have a relatively generous state pension with unusually low- qualification requirements. New Zealand can justify some form of reduction to New Zealand Super or raise eligibility barriers where someone has more than one basic state pension.

However, the way things work needs to change. There are some things that are just wrong and others that are applied unevenly.

Other countries don’t like what we do and that probably explains why we have just eight “social security agreements” that governments use to make their and their citizens’ lives easier.

Here are the things that are wrong and that, in essence, even the ministry recommended for change in 2008:

Where one of a married couple has an overseas pension that is more generous than New Zealand Super, it is wrong – even possibly illegal – to reduce the other’s New Zealand Super by the excess. No other superannuitant over age 65 has a family-income test applied in this way. It seems incomprehensible that these people are treated as though they are welfare beneficiaries. New Zealand Super is not like the unemployment benefit.

Occupational pensions, even if administered by an overseas government, should not be caught by section 70. It’s not straightforward to pin down what precisely is “occupational”, but as a principle, section 70 should have nothing to do with workplace superannuation, even if state-run.

The way in which this issue is explained to immigrants needs fixing. There should be country- by-country explanations showing precisely how section 70 works. Many pensioners now say the rules were never explained when they came here and they are probably right. There is no excuse for that today.

Fixing these three things does not require a change to section 70 but it does need a change in the ministry’s administration.

Then there is the “Australia problem”.

A potential fiscal time-bomb is brewing across the Tasman. To illustrate: an Australian who has never worked or lived in New Zealand can retire in New Zealand on full New Zealand Super even though the Australian Age Pension would have been lost through its income-asset test had she stayed in Australia.

The social security agreement between the two countries means that residency in Australia counts as residency in New Zealand for pensions.

On the other hand, a New Zealand superannuitant who wants to live in Australia after age 65 might lose New Zealand Super under the income-asset test even though he would have received it in full in New Zealand.

Australians may well prefer to retire in Australia despite losing the Age Pension but there are about 500,000 Kiwis living in Australia. When they reach pension age and find out how the Australian income-asset tests work, we must expect many of them to retire in New Zealand. That will be expensive.

The Retirement Policy and Research Centre thinks section 70 is no longer “fit for purpose”. It suited an era when migration flows were largely in one direction and were permanent.

It does not suit the modern world where labour ebbs and flows, following work and business opportunities. The centre has discussed some possible reform options; there are probably others.

Section 70 must change. We need a research-led, public discussion on how best to integrate pension systems between New Zealand and the rest of the world.

3 thoughts on “Overseas Pension”

  1. An excellent article which covers all aspects of the unfairness of the current Super system.
    Speaking from our own personal experience which we are currently feeling the effects from,my husband and I have spent almost equal portions of our very hard working life both overseas and in NZ. We have recently had it confirmed that neither of us will get any NZ Super due to our overseas pensions which were workplace schemes but publicly administered.
    It is interesting that in the recent Glibal Age Watch Index, NZ ranked 7th. How is that possible with almost 70,000 retirees in NZ being affected by the law which outlines the deduction of overseas pensions? How is that ranking possible when 1 in 5 NZers are facing poverty on their retirement?
    How can the NZ Government continue to ignore the issue as it has in the past?

  2. In deducting the UK pension from NZ Super as the NZ Government does has to be grand theft. Both I and my employer contributed to my pension through a National Insurance stamp. The UK Government were collection agents and fund managers. The NZ Government has no claim on that money whatsoever. There was a court case which went against them which the officials have chosen to ignore.

    On the statement that NZ Super is relatively generous, I really take exception to; it is causing thousands of pensioners to live in penury who expected under the Muldoon promise, when he stole the pension funds for his think big schemes that it was to provide pensions of 80% of the national average wage each!

    This election is the best time ever to remind the parties of the power of the ballot box because I am sure this issue will be the main consideration of many at election time; certainly mine.

    Colin Bosley

    1. Well written Colin. I wish I was as positive as you thinking that the election year is going to carry some weight as to having some action surrounding the grand theft you mentioned with our overseas pensions.
      My husband and I have lost all of our NZS as a result of the criminal application of Section 70 on our overseas pensions earned in Germany.
      MPs who touted for us 70,000 pensioners who are robbed of their NZS as we have been, have gone quiet, Kaspanz does not run anymore feature articles on this,or the need for reform of NZS. Not even is our cause featured on the agenda at next weeks forum which is being hosted by Auckland University’s Research Centre for Retirement. It seems that we have very little support where it is needed at the moment.
      The government is making too much money off our overseas pensions, plus all those bodies who pay lip service to our lobby must be careful if they wish to keep their government funds rolling in.Grey Power, Age Concern are sympathetic to a certain degree but also relatively unphased by the emotional and financial unjust our group is experiencing.

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