Pension rules causing stress and ill health
NZ Herald on 17 August 2010
By Claire Dale and Susan St John
Imagine this scenario: You are a hard-working middle-aged New Zealand male who meets a wonderful woman who is in New Zealand on an overseas trip. She is a successful professional woman from Germany where she has worked most of her life.
She likes you too and eventually she accepts your offer of marriage and decides to make New Zealand her new home.
You have worked hard on a modest wage and look forward to a time of less pressure in retirement. Your friends are beginning to retire and seem to be happy with their New Zealand Superannuation. How great it will be, you think, to have a basic inflation-adjusted pension that you might supplement in your early retirement with part-time work without penalty.
Of course, you understand that you will get one half of the married rate and that your wife will not get any superannuation despite having lived here for more than 10 years because she has a good state pension from Germany.
The magic day approaches and just before your 65th birthday you make the required visit to the Winz office. A Winz employee looks through your application and after some inquisitive probing informs you that you won't be entitled to any superannuation because your wife's German pension is too large.
You are shattered and angry when you leave the office, and even angrier when the verdict is confirmed by an official letter from Winz.
Your protests to the Ministry of Social Development, to the Social Security Appeal Authority, and to members of Parliament are answered with statements to the effect that the Government expects married people to share resources and support each other.
Further protests elicit the stock response that the policy is designed to ensure that a couple with an overseas pension are not in a better position than a couple who have spent all their lives in New Zealand.
Had you been sensible enough to fall in love with a successful professional New Zealand woman with an inflation-adjusted Government Superannuation Fund pension or a large company pension, as well as a sweet pot of KiwiSaver and other tax-subsidised funds, you would both get the full gross married person rate of NZ Superannuation.
If your wife had been a new immigrant with no pension and had not even worked in New Zealand, after 10 years' residency she would qualify and you would both get full NZ Superannuation.
Suddenly divorce looks like a good option.
But wait, you think of an even better solution. Under the 2009 amendment to the retirement legislation, you are entitled to take your full gross NZ Superannuation with you, with no deduction for your wife's pension, if you go and live in Germany, or indeed most of the countries in the world. Some of these will not even tax your New Zealand payment.
Leaving New Zealand, even leaving grandchildren and friends behind, seems preferable to a life with no individual income of your own and an apparent dependence on your wife after your lifetime of earning your own money and paying tax.
A forum this year at the University of Auckland Business School, co-sponsored by the Retirement Policy and Research Centre and the Human Rights Commission, explored these and other kinds of inequities and anomalies that affect in varying ways about 50,000 pensioners.
The old-fashioned Section 70 of the Social Security Act deducts any overseas state pension from any NZ Superannuation entitlement. A private pension and any lump-sum superannuation, even when greatly subsidised by the foreign Government, escapes this treatment.
Many of these so-called state pensions are paid for by employee and employer contributions and in fact look suspiciously like KiwiSaver.
The forum could not accommodate all who wanted to come to have their voices heard. These are not wealthy people. Many have suffered ill-health from the stress and injustice they have experienced. Many have spent years fighting their cases with officials and appeal authorities and by taking their cases through the courts.
These strategies have been stone-walled and have left an increasing feeling of alienation, bitterness and despair. Successive Governments have shoved the treatment of immigrants' overseas pensions into the "too hard" basket. And so nasty surprises await an increasing number on retirement.
The Retirement Policy and Research Centre believes that the greater mobility of the workforce demands that there is a fundamental principles-based reform that restores these pensioners as valued citizens of New Zealand.
The forum debated two possible options for the treatment of overseas pensions for the Government to consider.
A repeat forum will be held in Wellington on August 25.
* Associate Professor Susan St John is co-director of the Retirement Policy and Research Centre, University of Auckland Business School. Dr M. Claire Dale is a research fellow there.