Home‎ > ‎Newsletter‎ > ‎

16.06.2021


Dear current and future pensioners,

For those who do not follow parliamentary debates and the progress of bills, I don’t want to miss sending you a summary of the highlights of the pathetic debate before the Second Reading of the “New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill” on 9 June 2021. And I don’t mean “highlights” in a positive sense. (Full speeches here: https://www.parliament.nz/en/pb/hansard-debates/rhr/combined/HansDeb_20210609_20210609_44, also videos. You find a summary of the speeches at the bottom of this email.)

Unsurprisingly the bill which raises the residency requirement for NZ Super from 10 to 20 years passed with 108 Ayes from Labour, National and Act, and 10 Noes from the Green Party. (And don’t jubilate about the Greens’ vote; they are not concerned about the people whose overseas pensions are deducted from NZ Super.) The 20 years will understandably not apply for refugees (for humanitarian reasons) and citizens and residents of the Realm countries Cook Islands, Niue and Tokelau (to avoid depopulation of these nations).

Only formalities to follow

The Third Reading and the Royal Assent will only be formalities, and it is likely that the bill will become law in July 2022. As lined out in my previous newsletter, the 20-year residency requirement will be phased in over a period of 10 years, something we had lobbied for in our submissions to the Select Committee.

But this debate… All MPs who held speeches in Parliament repeated the same key words. They were ecstatic about the exceptions – rightly – made for refugees and Pacific peoples, throwing in the word fairness every few seconds. What is indeed fair about the 20 years is that you should not pay someone full NZ Super after only 10 years in New Zealand, the scheme is far too generous. If 20 years is fair if you think of New Zealanders who have lived and worked here for 45 years between ages 20 and 65 would be another debate.

But that’s not the point when this residency-based scheme exists as it is and the Government still denies NZ Super to a selected group of people who have paid into retirement schemes overseas that are not comparable to NZ Super. It is not logical either why the Government only pays proportional NZ Super to pensioners who leave New Zealand permanently under the Portability rules (without deducting the overseas pensions) but not to those who remain in the country.

Despite declaring over and over again that the residency requirement needs to be raised to 20 years to keep NZ Super sustainable, they quoted the numbers that show that even after this change NZ Super will become more and more unaffordable due to the changing age demographic, with the average life expectancy constantly rising. However, the debate about raising the pension age like most OECD countries is particularly tricky in New Zealand as the life expectancy of Maori and Pacific peoples is significantly lower than of the average population, and blue-collar workers are also spent when turning 65.

Self-praise, accolades and ignorance

These explanations were far more substantiated and useful than the self-praise and the accolades for how marvellously the MSD officials, Minister Carmen Sepuloni and others have performed in the process of getting the “Fair” Residency Bill ready to be passed. Even NZ First Member Mark Patterson who brought in his lazy 1-page piece of work in 2018 was praised for his effort - I think because he is a hard-working farmer in the South…

What they did with their over-effusive accolades for themselves and others was trying to cover up their ignorance which shone through brilliantly in the debate. The speeches highlighted that quite a significant number of MPs, the people who decide about and make New Zealand’s laws, don’t even understand what they are talking about. This is of big concern. At least you would expect that ALL members of Parliament know the details , background and consequences of a bill before they vote on it and sign it off to become law.

The two Labour Party members Greg O’Connor – who stumbled through his speech like a mixture of absent-minded professor and overexcited puppy - and Ingrid Leary didn’t even succeed to explain the residency requirements for NZ Super correctly! And both were members of the Select Committee that read 362 written and listened to 15 oral submissions! How should we expect MPs to understand the complexities of the Direct Deduction Policy we are fighting against so hard?

O’Connor said: “… what actually happens now is that to qualify for superannuation someone has to have spent 10 years before the age of 50, between 20 and 50, living in New Zealand, contributing, and, of course, coming back to New Zealand. And it's been five years after 50 working in New Zealand to actually qualify for the full pension at 65.”

According to this calculation you would need to live in NZ for 15 years after age 20! (And then he refers to receiving the FULL pension – as if we had proportional pension payments while living in New Zealand.) And BTW – there is no need to ever work in New Zealand to qualify for NZ Super.

Ingrid Leary said: “… to qualify for New Zealand Super you need to be a citizen or a resident, you need to be 65 or over, and you need to be over the age of 20, and then you can qualify after 10 years of residency—or after five years, if you are over the age of 50.”

This calculation says that you need to live in New Zealand for five years only to qualify for NZ Super if you move or return to New Zealand after the age of 50.

Leary also said: “The vast majority of those [migrants] accessing superannuation in New Zealand actually come from the UK—so that's about 86,000 people. If you look at the next largest group, that's China at 12,000.”

The MSD statistic from March 2021 lists 61,860 UK pensions – that’s pensions, not people, and the individuals are not necessarily all UK citizens. I do not have any number for Chinese, as Chinese pensions are not deducted from NZ Super although they are not different to any other overseas pensions with government input or administration.

Parroting MSD’s “alternative facts”

Others just threw baseless “alternative facts” into the ring, e.g. ACT member Damien Smith. He said: “New Zealand super payments are taxed where those in other schemes are not.” Which other schemes? 

The majority of overseas pensions is even taxed in New Zealand, as stated in IRD tax guide IR257 on "Overseas pension and annuity schemes" from May 2016: "In a very small number of cases, New Zealand has no right to tax pension income.” Only social security pensions from Finland, France, Germany, the Philippines, the USA and Hongkong, as well as war pensions from France and Germany, can’t be taxed in New Zealand but are taxed in the source country.

Andrew Bayly (National) who had sponsored the bill after NZ First’s exit from Parliament claimed: “We're one of the few countries in the world where you only need to have 10 years of entitlement. New Zealand and Australia are the two countries with the lowest entitlement. The average in the OECD is 26 years to be entitled to Super.” Or, as Helen White (Labour) said, the change would ensure that New Zealand comes “in line with other countries”. Which countries?

The point is that 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. 

He also mixed up the OECD facts, as, of course you can receive a contributory pension in Germany, France, the US etc, you just can’t receive it before the defined retirement age. In Germany you get your contributions refunded if you have contributed for a few years only, and if you leave the US permanently, you receive a pension if you have lived there and contributed to US Social Security for 10 years (or 40 quarters). In some countries you can retire earlier if you have contributed for a particularly long time or accept lower pension payments.

You can’t really blame Andrew Bayly and others for quoting “alternative facts”. They only parrot the misleading information from MSD officials we have been reading for years. But you can blame them for not questioning all this information when they have read, as they claim, all submissions during the Select Committee process.

They also have funny people in Parliament. What a laugh Ian McKelvie (National) is! He took the cake for ignorance by saying: “We've paid tax all our lives to get this blimmin superannuation, and I don't care what the younger people think – ha, ha! – because, frankly, we paid that tax and they will pay their own tax for their own superannuation.” Which is just not the case! They pay for your superannuation, and you have paid for your parents’ superannuation!

Blanking out the issue of the Direct Deduction Policy

Just like the Select Committee’s report to Parliament, the speeches before the Second Reading blanked out the issue of the deduction of overseas pensions, a problem that will be exacerbated by the new requirement because more migrants and returning Kiwis will be affected by the policy.

The only one who referred to the deductions – without really naming them – was Select Committee Chairman Duncan Webb. He praised Susan St John from the Retirement Policy and Research Centre from the University of Auckland for her submission because she “is well known for her advocacy in respect of poverty and hardship”, and he added that “she very much tied the residency requirements with the transferability requirements of pensions”. 

I bet barely anyone in Parliament understood what he was talking about. No-one else mentioned that a lot of submitters – including Susan St John - had suggested to stop the deductions, once the 20-year residency requirement sets in.

And, of course, no-one mentioned that there will still be more than 100,000 pensioners who will not receive full NZ Super or no NZ Super at all after living in New Zealand for 20 years, as the deductions will always remain the same, be it after 10 or after 20 years. People who have lived and worked here and paid taxes for 30 or more years will not receive (full) NZ Super. You can see it this way: they work in New Zealand as paid volunteers, paying for New Zealanders’ NZ Super with their taxes and receiving nothing in return.

But no word about those. The only ones mentioned were members of the Chinese community, and not just for their good submission in which they suggested a detailed phasing-in table for the introduction of the 20-year residency requirement which will be adopted almost unchanged. Other submitters were dismissed for their “self-interest”; I suspect this category includes all those who are upset that their overseas pensions are deducted. Of course, this doesn’t apply to the Chinese, as their overseas pensions have never been deducted – but will from 2022.

All the income tax paid by non-Chinese migrants didn’t count for anything – but, according to the speeches, it is obviously a huge gain for the economy that the Chinese grandparents look after their grandchildren, so their children can focus on work and contribute “very ably” (Ingrid Leary) to the economy. As if they wouldn’t work if their parents didn’t look after the grandchildren! They wouldn’t be allowed into the country if they didn’t work in well-paid jobs, and they would pay for childcare and boost the economy even further!

Absurd example not backed by immigration rules

Please don’t take the last paragraph as an anti-Chinese rant. I only use this comparison to highlight the unfairness inflicted on pensioners who are denied (full) NZ Super after living in New Zealand far longer than 10 or 20 years, just because they PAID for an overseas pension before setting a foot in New Zealand.

Duncan Webb used an absurd example to highlight why raising the residency requirement to 20 years is a question of fairness. He said: “The idea that someone might emigrate to New Zealand at, say, aged 63, […] never having paid any tax in New Zealand – I mean, quite possibly never would at the age of 63. And then after 10 years' residency be entitled to national superannuation payment for the rest of their lives, […] that is a huge benefit.”

A look at the Immigration NZ website would show under which conditions you can come to live in New Zealand as an older person: as a skilled migrant under the age of 55, as an Investor 2 if you have NZ$3 million, as an Investor 1 if you have NZ$10 million – or under the Family category. 

And really, how difficult would it be to exclude late-in-life arrivals like the 63-year old person from receiving NZ Super?! This would really be a question of fairness, as such a person has worked all their life overseas and should have built up enough of an employer/employee-funded or a private pension to survive in New Zealand without NZ Super. New Zealand should really not pay a pension to anyone who has contributed barely anything to the country before age 65.

Looking at the visa requirements, there is no need to say that “between 2009 and 2015 between 6,000 and almost 9,000 people in the over-60 age bracket [were] coming to live in New Zealand. Just exclude them from ever receiving NZ Super! There is no need to go so far off topic to deflect from the fact that New Zealand is blatantly ripping off migrants and returning Kiwis who have contributed for decades.

But don’t give up!

Sissi


Summary of the speeches

(Highlighted in yellow: wrong or questionable, highlighted in blue: important or fair point)

Andrew Bayly (National) – sponsor of Mark Patterson’s bill from 2018

New Zealand super costs in 2018 were about $14 billion. It was about 17 percent of Crown expenses.

This bill is an important element in basically trying to level off that escalation in price or cost that the Government's going to have to incur in years to come.

The other issue that we need to take into account is the ageing demographics of New Zealand are changing quite rapidly: 15 percent of New Zealanders are 65 or older at the present, but that's forecast to grow to about 25 percent by 2050.

We're one of the few countries in the world where you only need to have 10 years of entitlement. New Zealand and Australia are the two countries with the lowest entitlement. The average in the OECD is 26 years to be entitled to Super. 

So this bill, effectively, will affect fewer than 6,000 people, and what the bill proposes is that we raise the period of entitlement from 10 to 20 years. It excludes residents based in Realm countries, namely Cook Islands, Niue, and Tokelau—so they are, effectively, covered by New Zealand arrangements, which is only appropriate—and also anyone who qualifies under the veteran support arrangements. Also, one of the changes we made in select committee was the removal of any increased requirement for refugees. 

 

Greg O’Connor (Labour)

82.36 years is the age an average New Zealander can expect to live these days.

What actually happens now is that to qualify for superannuation someone has to have spent 10 years before the age of 50, between 20 and 50, living in New Zealand, contributing, and, of course, coming back to New Zealand. And it's been five years after 50 working in New Zealand to actually qualify for the full pension at 65.

We ensured that, in fact, this remains fair for the vast majority of people.

 

Michael Woodhouse (National)

Well, an honest conversation [on the retirement age] it needs to be, and, indeed, I thought we would have had one with the Labour Party when Jacinda Ardern was their spokesperson on social development, but then as Leader of the Opposition and now as Prime Minister did a 180-degree turn on that. Apparently it isn't such a compelling issue after all.

 

Helen White (Labour)

It's an important thing that we make sure that we are actually recognising that most of the people who are in the system will need to contribute to it, and will contribute to it for quite some time. That is being secured in this bill, because what we're doing is coming in line with other countries.

Many, many Māori don't live to the age of entitlement. So these are the areas where we really need to make sure that we're looking after people in a fair and reasonable way, and I'm very satisfied that we have struck a good balance here.

 

Ricardo Menéndez March (Greens)

The rate of senior citizens requiring food grants from Work and Income has gone up by 50 percent between 2014 and 2019, 

The sort of rhetoric behind the intent of this bill was to make our superannuation scheme fairer.

So while the intent of this bill was around sustainability, the Ministry of Social Development was quite clear that, actually, this bill would not achieve that intent. But what the Ministry of Social Development submission also pointed out was that this bill would increase hardship, and it was clear that this bill will increase hardship amongst our senior citizens, at a time where we are already seeing increasing rates of hardship. 

I am saddened that this House is passing a bill that will increase inequality amongst groups, some which are already facing discrimination in many, many levels of our society. 

What it will do is put more pressure on our welfare system, at a time where we are seeing a record number of hardship grants.

Taking steps to discriminate our migrant community, under the pretence of making our superannuation scheme fairer, is pure rhetoric, dog-whistle politics and, as per the Ministry of Social Development submission, not backed by facts and figures. 

 

Ingrid Leary (Labour) 

This is a bill about fairness.

We really need to look at what is fair for those people who have worked all their life here in New Zealand and contributed to the superannuation scheme, what is fair for them; also what is fair for those who come in a later stage or who may contribute in other ways, such as looking after grandchildren; and what is fair for people who, perhaps, have worked for a while in New Zealand, have left New Zealand and contributed to overseas economies, and then come back later in life.

To qualify for New Zealand Super you need to be a citizen or a resident, you need to be 65 or over, and you need to be over the age of 20, and then you can qualify after 10 years of residency—or after five years, if you are over the age of 50.

The problem that throws up is, for example, for a migrant who is in New Zealand for 10 years and is able to get full superannuation—even though they may not really have contributed to this economy—or a New Zealand citizen who has left New Zealand at the age of 25 and has returned at the age of 60 and has worked for 35 years somewhere else overseas and contributed to another economy. What is fair in that situation?

Māori men can be expected to live to 73; Pasifika men, 75.5; Asian men, 85; and so on. So if you look at the differential, 85 years for an Asian man compared to 73 years average for a Māori man, how could it be fair to then raise the levels when already there is a benchmark that cuts across that has them on different playing fields to start with?

The vast majority of those accessing superannuation in New Zealand actually come from the UK—so that's about 86,000 people. If you look at the next largest group, that's China at 12,000.

Some of them [people who made submissions to the Select Committee] came from much older people for whom English was clearly a second language, and it was great to see that they had made the effort to put forward their views and also to remind us of the really important work that some of them do as grandparents, looking after grandchildren so that their children can contribute very ably to this economy. 

 

Damien Smith (ACT) 

If you're legally resident and you've lived here for 20 years after the age of 20, as we are proposing, it's not means-tested or income-tested. [Question by the author: So what is the deduction of overseas pensions from NZ Super? Of course, it is a hidden income test!]

Our system is fair and cost-effective, and New Zealand Super payments are taxed where those in other schemes are not. 

The Ministry of Social Development showed that there were 774,651 people receiving super in March 2019. By 2060 the numbers are projected to be closer to 1.838 million. And by that stage, people over the current pension age will be 28.2 percent of the population, compared with 15.4 percent in 2018, 

In 1996, New Zealand spent $5 billion on New Zealand Super, which has grown to $10 billion in 2021. 

One of the things that we do believe at the ACT Party is that in terms of Super generally, as a standalone means of saving and superannuation as a second form of net, it is one of the most complex areas of confusion in the financial sector. We believe we should start thinking now over the 30-year period because we believe it's sustainable for the next 30 years but needs to have some radical change to meet future requirements. 

 

Duncan Webb (Labour)

I did want to point out that we had a really good submission from a group of organisations, eight Chinese organisations.

They were pretty supportive of the overall thrust of the bill. Now, they vigorously opposed the original drafting which would have seen it come in pretty much overnight, 

The other submission that I put a lot of store on for a number of reasons was that by the Retirement Policy and Research Centre from the University of Auckland, not least because Susan St John was the submitter, and we know that Ms St John is well known for her advocacy in respect of poverty and hardship. Now, I don't want to misrepresent that submission, because she very much tied the residency requirements with the transferability requirements of pensions, but in that submission, some really, really good points were made.

Ms St John in her submission noted its comparative generosity.

It's also a question of fairness as well, and, as has been pointed out, the idea that someone might emigrate to New Zealand at, say, aged 63, which is the example used, never having paid any tax in New Zealand—I mean, quite possibly never would at the age of 63. And then after 10 years' residency be entitled to national superannuation payment for the rest of their lives, and the numbers in this submission—I suggest people read it if they are interested—that is a huge benefit. So the average total amount paid to a superannuitant is $356,720 for a male or $458,640 for a female.

The amount of people coming to New Zealand in the kind of age bracket where they might expect superannuation in the next decade or two has fallen off considerably. But it's worth noting that between 2015 and 2019 there were between 6,000 and almost 9,000 people in the over-60 age bracket coming to live in New Zealand. So that's a lot of people that one way or another would have been—and that's as residents, migrant arrivals.

 

Ian McKelvie (National)

We've paid tax all our lives to get this blimmin superannuation, and I don't care what the younger people think—ha, ha!—because, frankly, we paid that tax and they will pay their own tax for their own superannuation. So I don't get this intergenerational stuff at all, I don't accept it,

With respect to superannuitants, most of us were too late for KiwiSaver, and I think KiwiSaver's the best thing that's ever happened to us. I'm, of course, old enough to remember a particular Prime Minister getting rid of the superannuation schemes that were started by a previous government, and I was actually a member of that—I wish I'd kept my superannuation, I probably would have been quite well off now. 

The country […] has relied entirely on our immigrants—or to a large extent on our immigrants—to grow our economy in the last, probably, large number of years really, right back, probably, to the Second World War. So it's essential that we don't discourage those sorts of people from coming to New Zealand, and people who want to come here, build a life in New Zealand, and certainly help improve our economy.

 

Angie Warren-Clark (Labour): (nothing significant or just repetitions of what others had already said several times)

 

Barbara Edmonds (Labour, member of the 10-member strong Labour Pasifika caucus)

I'd like to take the time to acknowledge the Minister, the Hon Carmel Sepuloni, and her Ministry of Social Development (MSD) officials for their advice. I believe this bill would not be in its workable form had we not had their input. For any members who have actually picked the bill up off the table today, it evidences how much input the officials had, because there was only the title and the commencement clause that have survived the select committee phase. That's how much this bill has changed during the Finance and Expenditure Committee.

Around 832,000 people receive New Zealand Super or the veterans pension.

Also, life expectancy also varies depending on what you do and where you work; so, for blue collar workers—the plumbers, the builders—versus white collar, which is people that work in businesses or in offices.

The policy intention behind those Super and veterans pension changes was to help the Realm countries' efforts against depopulation.

Whether an increase in residence requirements contributes to the fairness of New Zealand super for people who have contributed in New Zealand for longer—that's pretty much a no-brainer, based on the revised version of the bill.

 

Nicola Willis (National)

We must value our immigrant population. We must remain open to the world, connected to the world, and we must recognise that those who choose to take permanent residency in this country or to take up citizenship deserve rights and also duly take on responsibilities. So part of that is ensuring that they are able to access superannuation after 20 years of residency, but we also must recognise—that concept of fairness—that those who work hard in New Zealand throughout their lives do have an expectation that others fulfil residency before accessing New Zealand superannuation. This bill furthers both of those principles.

 

Steph Lewis (Labour)

So this bill proposes to raise the minimum residency qualification for New Zealand superannuation from 10 years to 20 years. It would ensure that a resident has lived in New Zealand for a substantial part of their adult life, which means that they will have also contributed through taxes to our economy for a substantial part of their adult lives here. 

Residing in a country for 10 years is an unusually short period of time to then become eligible for a full entitlement to a universal superannuation scheme at the age of 65. On average, we are seeing life expectancies lengthen, so it is possible that there are instances where an individual will be receiving their pension entitlement for longer than the period that they contributed to it for.

I want to finish by acknowledging the contributions that our migrant communities make to Aotearoa every day. We have many wonderful and diverse cultures, including in my own electorate. They've come to New Zealand and they've shared their culture with us, their customs, their food, their dress, their music, and even their language. I would like put on record that I am grateful for their contributions. I am grateful to the vibrancy that they bring our communities. But this bill is about fairness, it's about securing the future of New Zealand superannuation.

 

 

 


Comments