Home‎ > ‎The Law‎ > ‎

Lucky Chinese

Free trade with parents under the One Child Policy
Why should New Zealand be interested in China's One Child Policy when it comes to NZ Super? A strange question? No. This policy that was introduced between 1978 and 1980 and phased out in 2015 has dramatic implications on the cost of NZ Super. 

There are two tiers under Immigration New Zealand's Parent Category. The first tier allows rich people to come into the country and live with or near their children who have moved to New Zealand at least three years before their parents apply for residence. They have to have sufficient funds to not become a burden on New Zealand's social welfare system and must have proof of a guaranteed minimum lifetime income.

Tier two is for parents who have no adult children living in the same country as them, and here the Chinese nationals who became parents during their country's One Child Policy period come in. Every Chinese couple, made up of two single children, that has resided in New Zealand for three years and has a gross annual income of at least 
NZ$ 33,675 (as of May 2016) can bring in two sets of parents. (The income amounts have gone up dramatically in 2020, see here: https://www.immigration.govt.nz/new-zealand-visas/apply-for-a-visa/tools-and-information/support-family/calculating-sponsors-income-parent-resident-visa).

Two sets of parents, four New Zealand pensions

After ten years of residence in New Zealand these four pensioners receive four New Zealand pensions, and their Chinese pensions are not deducted, thanks to the dubious regulations which slipped in nearly unnoticed under the Free Trade Agreement Helen Clark's government signed with their Chinese counterparts in 2008, the first such agreement of a developed country with China. (There is no written proof about this claim but you bet that this has been an issue.)

Since then the Government (until 2017 under John Key) has not dared to discuss the issue with the Chinese because their government is easily upset. 

This article is not intended to be anti-Chinese. The intention is to demonstrate that the Direct Deduction Policy is getting crazier by the day. The CEO of the Ministry of Social Development, until February 2019 Brendan Boyle, who has the right to decide which overseas pensions are deducted from NZ Super, lost any common sense and logical thinking. The approach became totally inconsistent, and the treatment of pensioners unfairer by the day.

Not anti-Chinese but pro-fairness

We do not demand that Chinese parents who are over 65 years old should not receive NZ Super after ten years in New Zealand as long as this is the only requirement for being eligible for NZ Super. But we do not tolerate that pensioners with overseas pensions from most European countries, the USA, Canada etc do not receive the same treatment. We do not accept that they do not receive full NZ Super after living in New Zealand for ten years, having contributed to the economy and society far longer than that - and even speak the language!

The official explanation why Chinese pensions are not deducted from NZ Super has been for many years that they are not "administered by or on behalf of a government" but by local authorities - which is the only way to administer the pensions in such a huge population of 1,38 billion people (as of May 2016). But the question if an overseas pension can be deducted from NZ Super must not be who administers the funds but who has paid for it. 

At some point MSD suddenly didn't talk about the administration of Chinese pensions anymore but came up with the information that China paid state pensions since 1998 and that they would be deducted from 2023. These dates later changed to 1997 and 2022, as in this official letter: https://fyi.org.nz/request/10454-clarificaion-of-chinese-pension-is-not-subjct-to-section-70-of-social-security-act

The explanation seems to be another big lie

However, in late 2017, one very active pension advocate, Bob Newcombe, found out that the explanation with the local administration of Chinese pensions seems to be just another lie dished up by MSD. 

He made the effort to read "ENTERPRISE PENSIONS IN CHINA: HISTORY AND CHALLENGES" by X. Y. Zhang from the Institute for Fiscal Research at the Ministry of Finance in Beijing. If you have a chance to get a copy of it, read the history especially from page 88. The main points are:

"In 1988 all pensions came under the Ministry for Labour and Social Security. Not only are these pensions part of a programme for old age, they are in fact part of the government programme and, reading further on, central government contributes to shortfalls in a province's pension expenditure.

They were enterprise (company) pensions, social security contributions collected by the enterprises and the resulting pensions given out by them.

After many alterations to the system, in 1998 all enterprise pensions were taken over by the Ministry of Labour and Social Security (page 89, article 2.5).

 A bit later on the resulting pensions are described as state pensions, enterprise pensions ceased to exist. 

So there we have it, the MSD is wrong, Chinese pensions are state-administered, the collection of social insurance contributions collected by different government agencies, the funds invested in government bonds and pensions paid out from contributions by contributing workers.

The different treatment of these pensions has created a precedent, our overseas pensions are of the same set-up, self-funded social security pensions administered by the government.

In fact it says the Chinese government tops up pensions in regions that fail to produce the necessary funds to pay them out, e.g. where the number of workers fail to produce enough revenue, so some have government contributions and yet are still not subjected to Section 70."

Chinese pensions even more state-administered than others

We also had a look at the "History and Challenges" of "Enterprise Pensions in China" and can only agree. These Chinese pensions are even more state-administered than others, particularly those from before 1997 or 1998, with a huge number of ministries involved – and the newer individual accounts particularly in poor rural areas are empty, require more enterprise contributions in retirement or even government spending (top-ups!).

Like Bob Newcombe we challenge MSD's announcement to deduct Chinese pensions from July 2022, as they use the 1997 date as the start of China paying state pensions and add 15 years of contributions (because you need to have been in the scheme for 15 years before being eligible for the pension) plus 10 years of residence in New Zealand. 

But as shown, the 1997 date is highly doubtful. Also the announcement (after an official information request) that only state-administered Chinese pensions will be deducted from NZ Super and that the deductions will not apply to "Chinese territory pensions" - whatever this is - leaves suspicions that there will be new dubious exceptions.

Not deducting Chinese pensions while all other contributory government-administered pensions are deducted (as long they are not paid out as lump sums but in monthly or other regularly occurring instalments), would only be possible under a Social Security Agreement – which doesn’t exist.

It proves indeed that there is discrimination of all other nationalities. Therefore the goal has to be that all the other nationalities are treated as the Chinese – not vice-versa, or MSD/the NZ government just deducts the Chinese pensions and doesn’t change a thing about Sections 187 - 191 (formerly: Section 70). There must have been a direct instruction to MSD to not deduct the Chinese pensions. But, of course, we have no proof for that. But we remain suspicious.

Impressive statistics

The graphs below show how exponentially Chinese immigration has risen, as well as the dramatic rise of Chinese nationals applying for residence under the Parent Category - which has been temporarily suspended in October 2016, among changes that have been made to reduce the number of immigrants coming to New Zealand. See more information and a link to a newspaper article on the topic in the right column on this page.

Chinese Lantern Festival

Update 28.11.2017
Just another lie?
Reading about the history and nature of Chinese pensions, we can only conclude that MSD has just dished up another lie in its attempt why Chinese pensions are not deducted from NZ Super. These pensions are, despite MSD's claims of the contrary, administered by the central government, and low pensions are even topped up by the government.

Read more about this in the main article on the left under the headline: "The explanation seems to be another big lie"

This is an example of the fruitless discussions with MSD:

Update 17.10.2016
Parent Category temporarily suspended
Last week Immigration Minister Michael Woodhouse announced that the Government was tightening the number of residency permits. Among the changes is the temporary closure of the Parent Category to new applications. So far the enormous health costs to parents has been cited as a reason for the suspension. The pension cost for the Chinese parents has not even been mentioned. It is possible that the Immigration Minister doesn't know about it.
More links and information:

Growing concern
Article in the New Zealand Herald (09.05.2016) about the growing trend and concern on Chinese immigrants leaving their parents alone in New Zealand:
Chinese leaving their elderly alone in NZ

In the article, the author, Lincoln Tan, quotes Massey University sociologist Paul Spoonley who says that New Zealand's immigration policy targets those who can contribute economically, and most tend to be working age.

"But they leave their parents behind and at some point that becomes a concern", said Professor Spoonley in the article. 
"New Zealand does allow for family reunification. But there does need to be close monitoring that these family units stay in New Zealand. "They have a key responsibility, if they sponsor family members, to look after them after arrival."

It is not known how many parents are being left in New Zealand by absent sponsors, but figures obtained under the Official Information Act by the NZ Herald in 2013 showed 31 per cent of the 3000 sponsors who left were Chinese.

The article also quotes a Chinese social worker who said that many sponsored their parents to be caregivers of their children but they were often left to fend for themselves once they were no longer needed or when the children did not need supervision anymore.