If we wanted, we could describe sensational cases of double-dipping pensioners who accidentally or intentionally rip off the NZ Super system. Australians cashing in NZ Super without having spent a minute in New Zealand before age 65. Chinese nationals feeding their grand-parents at the New Zealand taxpayer’s cost. South Pacific Islanders enjoying special rights regarding the payment of NZ Super overseas. And also the Kiwi lifestyle beneficiary who has never worked and includes a non-qualified, much younger mail-order bride from the Philippines in his application for NZ Super.

 

Surely a handful or two of such double-dippers do exist. But they are a tiny minority within the minority of superannuitants with overseas pensions. Most of these pensioners are ordinary people who have contributed to New Zealand’s economy for decades. And if those few cases that do happen actually make headlines, they contribute to painting a negative picture of immigrants, as many New Zealanders still think immigrants are the only ones receiving overseas pensions. However, there are lots of Kiwis affected by the Direct Deduction Policy and the strangest of strange Social Security Agreements they might not even know about.

 

 

Pension and benefit experts deal on a daily basis with superannuitants who suffer the shock of their lives when they learn that their overseas pensions are being deducted from NZ Super. Those retirees do not want double pensions. Rather they want proportional payments from New Zealand for what they have contributed in this country. They are not looking to take advantage of New Zealand's pension system. When they came to New Zealand in the 1960s or 1970s or earlier, the pension system was the last thing on their mind.

 

All they want is a fair treatment of longtime immigrants who suddenly struggle through their retirement with fixed incomes, with bullying by authorities, with appeal systems stacked against them and no officials willing to help, be it the Ombudsmen, Retirement Commissioner, Human Rights Authority or Race Relations Office. None of them has ever challenged the Crown Law makers.

Welcome as cash cows and treated as second-class citizens

 

The story of making people with overseas pensions suffer started with pure meanness in the attempt to generate money, and was aimed at immigrants who are welcome as cash cows but treated as second-class citizens. It is collateral damage that was not intended in the original Act in 1938 which introduced the Direct Deduction Policy. But it now affects more and more returning Kiwis. Adding Spousal Provision in 1985 was also aimed at immigrants and is now hitting Kiwis coming home. It went on with amendments disadvantaging Kiwis who leave the country.

Already before the 2009 New Zealand Superannuation and Retirement Income Amendment Act, passed in November 2009, quite a big number of anomalies and inequities regarding NZ Super existed. But they affected only a small number of people. A few nationalities, especially people from the South Pacific, enjoyed preferential treatment, whereas retirees with overseas pensions from Europe, the USA, Canada and many other countries were disadvantaged due to Section 70.

 

An amendment act that created more anomalies

Knowing about all these anomalies, not only the average Joe but also tax and superannuation experts would have thought that the goal of an amendment act would address these problems, and create more fairness towards all people affected. 

Instead, the 2009 Superannuation and Retirement Income Amendment Act (which amended the 2001 Act) created even more anomalies!

It did not change anything for those falling within the scope of the eight Social Security Agreements (SSAs) New Zealand has with a few countries worldwide.

It did not address the profound problems that were identified by the Ministry of Social Development itself in several reviews, and in various submissions on the Bill. It did not change anything for those retiring in New Zealand who fell under the scope of the 1964 Social Security Act, meaning: those more than 52,000 people whose overseas pensions are deducted from NZ Super, despite earlier announcements that some of those issues (Spousal Provision in particular) would be reviewed.

In fact, this 2009 Amendment Act affects only about 1,000 pensioners. Under critical judgment you could be inclined to say that the whole act was not much more than a symbolic gesture, so nobody could say the Government had done nothing. As following statements and letters by the Minister for Senior Citizens confirmed, only changes were implemented that cost nothing or next to nothing.

 

"The New Zealand government has created a mess"

Andrew Smith, international tax expert from Victoria University in Wellington, talked during his presentation at the Overseas Pension Forum at Auckland University on 24 February 2010 about the perception of New Zealand's superannuation policies at an international level. "At a recent conference in Europe it became obvious what a mess the New Zealand government creates with its policy", he said. "It brings terrible hardship to some people and terrible windfalls to others."

This quote has to be adjusted: it brings terrible hardship to many people and windfalls to a very few others, as explained at the beginning of this text.

Those profiting most are nationals from small South Pacific Islands. The 2009 Amendment Act even enhances their privileged status (see Portability page). The thought behind this seemingly generous treatment, however, is not benevolence but a simple calculation: It is cheaper to pay Pacific Islanders a higher pension and get rid of them. Far away, they are no burden on New Zealand's public health system. 

 

 

The most unbelievable fact, however, is the preferential treatment of Australians over New Zealanders. New Zealanders retiring in Australia - and this happens frequently - are penalised and might miss out on pension payments completely. This is thanks to Article 9.3 in the Social Security Agreement with Australia which says that New Zealand will not pay more than the Australian entitlement would be. So if the Australian entitlement is zero, New Zealand will never pay a cent. (Also read The big bangs for Kiwis.)

In return, Australians (and New Zealanders who have spent their whole working life there) enjoy a privilege that takes your breath away: if they decide at and after age 65 to live in New Zealand, they can collect full NZ Super when they have never contributed to the New Zealand tax base. They even get free health care.

 

This, curiously enough, applies to rich Australians who are not entitled to the means-tested Australian Age (state) Pension. And they can bring their government-subsidised private retirement savings without risking them to be deducted from NZ Super (see extra info in the right column on this page). Poor Australians' Age Pension is abated against NZ Super. If it is lower than NZ Super, New Zealand tops it up.

Somehow this policy looks like a big lottery win for Australians and Kiwis returning from long-term work in Australia. But as mentioned, migration takes place in the opposite direction: there are eight times more New Zealanders in Australia than Australians in New Zealand. This means that both states benefit from the Social Security Agreement.

Statistics from the Ministry of Social Development show that at the end of June 2008 there were 4,918 people receiving Australian benefits and pensions in New Zealand. At the same date, 13,922 people were entitled to New Zealand benefits and pensions in Australia. Of these, 11,055 people were entitled to New Zealand Superannuation. What these numbers do not say is what fraction of NZ Super those Kiwis received in Australia, and if any at all.

 

More numbers (source: Te Ara Encyclopedia): In 2001, about 96,000 Kiwis drew some kind of Australian welfare. In the early 2000s Australia claimed that the annual cost was as high as AU$ 1.1 billion. New Zealand pointed to the contribution its citizens made to the Australian economy, including tax payments of around AU$ 2.8 billion per year.

In 2001 new restrictions required New Zealanders to obtain permanent residence if they wished to access social security, gain citizenship or sponsor other people for permanent residence. While these restrictions applied to New Zealanders in Australia, the converse did not apply, reflecting the fact that there were eight times more New Zealanders in Australia than Australians in New Zealand. Australian officials expected New Zealand immigrants to halve under the new restrictions.