Home‎ > ‎The Actors in Wellington‎ > ‎

Thinktank Michael Cullen

Apples - oranges = empty basket
Michael Cullen of the Labour Party, then Deputy Prime Minister, Attorney-General, Minister of Finance, Minister in Charge of Treaty of Waitangi Negotiations, and Leader of the House of Representatives, was the man in the Labour-led Government until the end of 2008 who administered the country's coffers.
In no letter of any politician who supports Section 70 the word "fair" will be missing. Michael Cullen does not disappoint.
Here are excerpts of a letter from October 2008 a pensioner forwarded to us:
"... I would like to assure you that the Government wants to ensure the state provision of pensions is fair to all older New Zealanders regardless of the countries they have lived and worked in.
The direct deduction of overseas pensions from NZS has been under review for some time. [...] The review also formed part of the confidence and supply agreement with New Zealand First.
The review was completed in October 2007 and the recommendations were subsequently reported to Cabinet. A number of recommendations for change were made to the treatment of overseas pensions for superannuitants living in New Zealand, and these will be implemented as funding and legislation opportunities allow. Overall, the review found that current policies are operating reasonably well and they provide very good protection for most New Zealanders. (Editor's note: Cabinet agreed that Spousal Provision should be scrapped - but there was no money in the budget to implement it, and then Labour was thrown out of government. National does not care about the mentioned review - only about the paragraph that states that the current policies are operating reasonably well...)
Difficulties arise because New Zealand's residence-based system contrasts with the contributory systems operating in most other Western countries. Residence-based systems [...] are not easily able to accommodate immigrants or residents who wish to spend time out of the country.  [...]  The review noted that while there may be differences in the way NZS and state pensions in other countries are funded, both pensions are nevertheless state social security pensions that are paid for the same purposes. The review therefore concluded that there should be no argument about whether receipt of another country's state pension affects entitlement to NZS, but there could be an argument about how NZS entitlement is affected."
The art of provoking envy
The following paragraph is a brilliant example of how the New Zealand government tries to provoke envy and opposition in Kiwis by subtly describing the recipients of overseas pensions as greedy double-dippers:
"In the first case, where a person moves between overseas countries that have contributory social security schemes, they generally cease making contributions to the first country's scheme and begin contributing to the second country's scheme. At retirement, when the pension entitlement from the first country is added to the second country, the person will receive a pension effectively equivalent to one full pension.
In the second situation, where a person qualifies for NZS and they also receive an overseas pension, then if these were added together a superannuitant would effectively receive more than one pension. An adjustment is therefore made to their NZS entitlement under Section 70 of the Social Security Act 1964."
Note: Really very clever!
In the first case the two part-pensions amount to a 100% pension and the amounts do not count at all. The recipient has paid for both his entitlements by huge chunks cut off his wages. Taxpayers in New Zealand can save all this money and put it into private saving schemes the Government cannot touch. Recipients of overseas pensions do not receive two full pensions but the New Zealand government treats apportionate overseas pensions as 100% and deducts them at a rate of 100% from NZ Super.
If we developed Michael Cullen's fine thoughts further, the result of this calculation would be that someone with an overseas pension receives nothing. The proof:
           100% NZ Super
        - 100% overseas pension
Result:     0%

Read Michael Cullen's comment about New Zealand's residence-based pension system and tell us why New Zealand has a residence-based system.
The quote:
"Residence-based systems [...] are not easily able to accommodate immigrants or residents who wish to spend time out of the country."
Yes, you are right.
It is strange that New Zealand as a nation defined by immigration has a residence-based system. 
Without immigrants - and even Maori are immigrants here - New Zealand would still be some bush-clad islands in the South Pacific where millions of moa and kiwi would happily roam around.

The eternal Government story about the double-dippers
We strongly believe that you cannot compare the naked amounts of contributory pensions (the more you pay into it, the more you get out of it) and a tax-funded and residency-based state pension like NZ Super.

No contributory pension (when a recipient has not contributed all his/her working life) is a 100% pension but a portion of a full pension, proportional to the years of contribution.

If a deduction is made, the only reasonable solution can be on a percentile basis, taking the years of contributions in one state and residence in New Zealand as the determining factors.