Time to STOP New Zealand's pension rip-off
People entitled to a New Zealand pension, New Zealand Superannuation, who also receive an overseas pension, are likely to be in for an unpleasant surprise: their overseas pension will be deducted from their New Zealand Super. This is called Direct Deduction. If this person’s overseas pension exceeds the NZ Super rate for one individual, the “excess” amount is carried over to their partner’s entitlement and deducted from his or her NZ Super. This is called Spousal Provision. The practice is governed by Section 70 of the Social Security Act.
In a worst-case scenario, one partner’s high overseas pension can cancel out a couple’s combined New Zealand pension entitlement. The New Zealand government uses other states' contributory pension provisions for the payment of the NZ Super benefit.
A bad Super surprise for immigrants and Kiwis
This policy affects not only immigrants but also a growing number of New Zealanders, due to increasing global mobility and international work histories. It has been identified as highly unfair, but so far no changes to the law have been made.
This website highlights a number of points why this is so, how the Government is trying to keep the issue off the agenda and what this does to the people affected by Section 70.
While there are many aspects of the New Zealand pension law that need to be addressed, the primary aim of this website is for contribution-funded overseas pensions to be exempt from abatement against tax-funded NZ Super. Only overseas pensions similar to NZ Super must be deducted from NZ Super. Most urgently, however, the Spousal Provision rule needs to be discontinued as it is in breach of Human Rights and constitutes discrimination on grounds of family status.
Facts and figures
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o People with overseas pensions living in New Zealand: When we started this website in 2010, we had to use the statistic of the Ministry of Social Development from 2008. According to this statistic, 52,756 people received overseas pensions in New Zealand. This number has now (July 2012) risen to 63,989. Most are from the UK (47,898, compared to 41,359 in 2008), Australia (8,953, compared to 4,918 in 2008), and the Netherlands (3,588, compared to 3,324 in 2008). Number four is Canada with 1,418. All other countries provide overseas pensions for less than 1,000 people. (More details from 2008 here.) The total number has been increasing steadily, from 42,336 (2004) to 46,996 (2005), to 51,464 (2006), and after a slight drop in 2007 to 50,019 up again to 52,756 in 2008 and 63,989 in 2012. According to information given to the "Sunday Star Times" in mid July 2012, 24 per cent of those 64,000 retirees have deductions higher than NZ$ 5000 a year.
o Misleading statistic: The MSD statistic is misleading, as only overseas pensions of people are counted who also receive a portion of NZ Super because their overseas pensions are lower than NZ Super. Immigrants and returning Kiwis who miss out on NZ Super completely are not counted. Therefore the number can be dramatically higher. We happen to know the number of German pensions paid into New Zealand. As of June 2010 exactly 802 people in New Zealand received a German pension. The MSD statistic of June 2008 listed 200 German pensions. Even if this number is slightly higher now it means that 75% of people with German pensions do not receive NZ Super thanks to the Direct Deduction Policy - and that the total number of all nationalities missing out completely is several thousand higher than the nearly 64,000 published by MSD.
o Spousal Provision policy: 124 people were affected by Spousal Provision in 2009. Numbers here also rising, in 2010 it was at about 200.
o The myth of a universal pension: The Crown Law Office defends Section 70, asserting that a couple can be perceived as a single economic unit. This is questionable as NZ Super is not a needs-based or means-tested system, and is received by some of the nation's wealthiest citizens as individuals in their own right, whether married or not, and regardless whether both of them have ever worked and paid taxes.
o NZ Super overseas: At the end of June 2008, 13,825 people living overseas were receiving New Zealand Superannuation (and 38 Veteran's Pensions) - at the time all at drastically reduced rates. Pensions overseas were paid at a rate of 50%; now they are proportional to time spent in New Zealand. So a total of 66,581 people did not get full NZ Super and many more none at all. And it is only paid to people who are ordinarily resident in New Zealand when applying for NZ Super.
o Pensions similar to NZ Super: Only eight other countries and one city pay a universal pension with no test other than citizenship, residence and age, comparable to NZ Super: Mauritius, Namibia, Botswana, Bolivia, Nepal, Samoa, Brunei, Kosovo and Mexico City.
o Ministerial mind twist: In its 2005 Review the Ministry of Social Development stated that only overseas pensions that are similar to NZ Super should be deducted, and that earnings-related second tier overseas pensions have little resemblance to NZS. In the 2007 Review the deduction of "fundamentally different" pensions was justified with the following mind twist: "Both pensions are nevertheless state social security pensions that are paid for the same purpose." This states that both kinds of pensions are - pensions. The Chief Executive of the Ministry of Social Development has the almighty power to decide which overseas pensions can be deducted from NZ Super. We urge the Government to take this overwhelming power off this one single civil servant and stop deducting overseas pensions that are not similar to NZ Super. Read more about the findings of the famous Reviews.
o The Government's justification of the injustice: Paying a person NZ Super and not deducting his/her overseas pension would place him/her in a better position than a New Zealander who has never left the country. The truth is that a lifelong New Zealander married to someone with an overseas pension might not get any NZ Super at all. He is worse off. People who have spent 50% of their working life in New Zealand might get 0% NZ Super. Parliamentarians, civil servants and others enjoy special treatment at taxpayers' cost. More about this on our Offenders and Letters from Wellington pages.
How much the NZ government cashes in from other countries
(Statistic by the Ministry of Social Development, 20 July 2012)
1. Amounts are per year in NZ$
2. The number of pensioners includes only those who receive a portion of NZ Super, and be it only a few dollars. Those who miss out on NZ Super completely are not included.
3. The "Other" category combines countries with fewer than ten pensioners each.
Annual deduction bands Number of pensioners
NZ$ 5,000 and under 49,073
NZ$ 5,001 to 10,000 11,452
NZ$ 10,001 to 15,000 2,699
Over NZ$ 15,000 765
The figures in the category over NZ$ 15,000 and a proportion of those in the category 10,001 to 15,000 includes pensioners who have a Kiwi partner who has never left the country. They do not receive any NZ Super and, on top of this, have to pay for their partners' NZ Super (Spousal Provision).
23 July 2012
Finally one New Zealand newspaper has taken a stance and exposed the way the Direct Deduction Policy is applied as grossly unfair to immigrants and returning Kiwis. The Sunday Star Times had big articles on the topic three weeks in a row, starting with Labour MP Jacinda Ardern criticising the rip-off. The following Sunday the deputy CEO of the Ministry of Social Development was given a chance to reply. The twisted and distorted "truths" provoked an avalanche of letters to the editor, and business editor Rob Stock delivered a very realistic opinion piece. Texts and links on our page in "Media Coverage".
See the latest figures of how many people suffer from the Direct Deduction Policy and how much the New Zealand government cashes in from other countries at the bottom of this page.
14 March 2012
As you all know, the general election last November has not brought any changes that would help our cause. Please keep on writing to parliamentarians and the new Minister for Senior Citizens, Jo Goodhew. We will surely not give up the fight for justice.
20 November 2011
The countdown to New Zealand's general election on
26 November 2011 is nearly over. To make voting easier, best you check out the stance of this country's major and minor parties on the direct deduction of overseas contributory pensions.
No party has ever been as pathetic on this topic as the ruling National Party, so if you ever want fairness and justice this is surely not the best choice. Whether you just try to get rid of John Key and his ignorant colleagues by voting for Labour and pray for change, or if you choose one of the smaller parties that could lobby National on behalf of all of you is up to you.
Best you have a look at the pages "Letters from Wellington" on this website to find out how the parties are ticking on our issue.
1 October 2011
The new CEO of the Ministry of Social Development, successor of all overseas pensioners' arch-enemy Peter Hughes, is
Brendan Boyle. Start addressing your complaints about the Direct Deduction Policy to him - not that he gets the impression we will retire from protesting...
21 June 2011
John Carter has retired from Parliament and as Minister for Senior Citizens. He will become High Commissioner to the Cook Islands. Craig Foss has taken over his ministerial post. Tell Craig Foss what you think of the Direct Deduction Policy.
Do not miss to read or listen to John Carter's revealing valedictory statement in which he tells his colleagues (and us) that it is okay for him to receive a NZ$ 1.5 million GSF pension because HE has contributed to it and not the taxpayer. Obviously there is a big difference if a politician contributes to a (underfunded)fund from HIS money or if immigrants and returning Kiwis pay into funds from THEIR money. Hypocrisy at its best.
1 April 2011
No April Fools' Day joke: The Ministry of Social Development (MSD) has announced yesterday that Peter Hughes, the ministry's Chief Executive, will leave his post in September. This is good news for superannuitants with overseas pensions, as Hughes is the mind behind the hardship many retirees are subject to due to the Direct Deduction Policy. With a new CEO things can only get better - as they cannot get any worse. Write to the new CEO as soon as he/she takes office. Read more about Peter Hughes' decision to step down after the expiry of his contract in September here.
The Irish Ministry of Social and Family Affairs has repeated that it finds New Zealand's Direct Deduction Policy applied on contributory overseas pensions unacceptable and that their contributory pensions are not part of the Social Security Agreement with New Zealand. Read more here.
7 December 2010
The Retirement Commission has recommended to discontinue Spousal Provision. Read more on the Related Topics page "Organisations for Seniors".
We have urged the not very well-informed German Ministry of Work and Social Affairs (BMAS) to contact the New Zealand government and express its disapproval of New Zealand's practice of deducting contributory foreign superannuations from NZ Super. If you receive a German superannuation, write to BMAS. Read more on the German page "Besonderheiten für Deutsche".