The so-called portability rules define the circumstances under which pensioners can receive their superannuation if they wish to retire outside the country that pays their superannuation, in this case NZ Super (and Veteran's pension).
To qualify for NZ Super being paid outside New Zealand, normally (not always) two major portability rules apply:
The portability rules are in two parts:
The 2009 New Zealand Superannuation and Retirement Income Amendment Act which came into force on 5 January 2010 brought one positive change: it established a new formula for general portability. For every month spent in New Zealand between ages 20 and 65 a pensioner receives 1/540th of NZ Super.
This means: if someone has lived in New Zealand for 20 years and moves overseas in retirement, he/she receives 240/540th of NZ Super (240 being 20 years = 240 months). The minimum payment therefore is 120/540th of NZ Super, as you need to have lived in New Zealand for a minimum of 10 years (five of which after age 50) in order to receive a pension.
For persons who have spent the entire 45 years of their working lives in New Zealand between age 20 and 65 and wish to retire overseas, this means that they will now be paid 100% NZ Super rather than just 50% as before.
This sounds good. But if you have a closer look you realise that it is pathetic, as it affected less than 1,000 people in total. According to MSD figures, the general portability provision impinged as little as 226 persons in 53 countries at the end of June 2008 (and 252 in March 2009); the principal destinations were China, India and the USA.
The huge majority of people are hugely disadvantaged because they retire in countries which have Social Security Agreements with New Zealand, especially if the country of retirement is the United Kingdom, and in many cases also Australia. Pensioners moving to the UK do not receive any NZ Super payments at all.
At first glance the new portability rule seems fairer towards the majority of New Zealanders as it means that people who have not spent their whole adult lives in New Zealand and want to retire overseas do not get full NZ Super.
(Note: the expression "working life" only describes the 45-year residential requirement, not years in which someone has really worked and paid taxes in New Zealand.) NZ Super is paid at a rate of 1/540 for every month of residence in New Zealand between age 20 and 65.
But the seemingly fairer treatment becomes relative when you examine the details.
Before you decide to move back to your (first) home country in retirement in order to avoid the direct deduction in New Zealand, do your research on the pitfalls that could be waiting there. The main factor that could impoverish you there is health insurance. In Germany, for example, you cannot join the state's health insurance which offers affordable rates for pensioners, if you have lived outside the country for more than ten years. As of August 2016, basic private health insurance for a pensioner cost any amount between 650 and 750 Euros - per month!
Nationals from 22 Pacific states receive special treatment.
They fall in three categories:
1. Niue, Tokelau and the Cook Islands (since 1993), as New Zealand has a constitutional relationship with them, and due to their inability to provide reciprocal social security. They also suffer from depopulation, so NZ wants to encourage these nationals to return home. It can be seen as a special form of foreign aid. Critics, however, say New Zealand encourages Pacific Islanders to return home because many of them suffer health problems due to obesity-related illnesses and are a burden on New Zealand's public health system.
2. Samoa and Tonga (since 1999), as New Zealand has special relationships with these countries.
3. American Samoa, Federated States of Micronesia, Fiji, French Polynesia, Guam, Kiribati, Marshall Islands, Nauru, New Caledonia, Northern Mariana Islands, Palau, Papua New Guinea, Pitcairn Islands, Solomon Islands, Tuvalu, Vanuatu, Wallis and Fortuna (since 1999).
There were no obvious reasons for including overseas territories of the USA and France, without special historic or present relationships. Strangely enough, no reciprocal Social Security Agreements exist with France and the USA.
Pacific Islanders get full NZ Super if they retire in their home countries after living in New Zealand for as little as 20 years. (New Zealanders and - most - other nationalities get only a portion of NZ Super. They get full NZ Super - except in non-agreement countries - after living 45 years in New Zealand. Kiwis and others would get 44% after 20 years.) For 10 complete years since age 20 Pacific Islanders get half the basic rate (New Zealanders and others only 22%).
Exception: under this arrangement, any overseas pension a person receives is deducted from any rate of NZ Super.
In 2005, of the 7,000 people paid NZ Super overseas at a cost of NZ$ 48 million per year (average less than NZ$ 7,000), only 190 were affected by the special portability agreements (according to the MSD Review).
At the end of June 2008, 16,716 New Zealanders living overseas were receiving pension payments or other benefits from New Zealand. Of these people, 13,825 were receiving NZ Super. This increase has been mostly caused by pensioners who have moved from New Zealand to Australia. Remember: some might only receive a fraction of the full amount of NZ Super.
In 2008, 482 residents of Pacific Islands received NZ Super. Annual cost: NZ$ 6.844 million per year (average NZ$ 14,200).
So you see, it is a tiny number of people of mostly poor nations - while nothing is done for the more than 52,000 people affected by Section 70 and living in New Zealand.
Parliamentary debate on Portability (New Zealand Superannuation and Retirement Income Amendment Bill, War Pensions Amendment Bill/Third Readings) here and here.
First reading here.
Reassessment of NZ Super payments after 5 Jan 2010
According to information from International Services (WINZ) during a phone call on 11 June 2010, pensioners receiving NZ Super overseas do not have to be present in New Zealand to have their payments reassessed. We were told that all pensioners affected by the 2009 Amendment Act were contacted by WINZ and informed about the changes - but only those who answered the letter were reassessed. If there are people out there who think they are entitled to more than 50% under the new formula and those who have not received the letter should contact WINZ and ask for reassessment. The NZ Super payments would be backdated to 5 January 2010 when the new formula became law.
If someone has spent less than, let's say, 20 years in New Zealand and five over the age of 50 and would therefore receive less than 50% of NZ Super under the new formula, this person will keep on receiving 50% if he/she retired overseas before 2010, so he/she is not worse off. Someone who has spent his whole life here and has retired to a non-SSA country before 2010, will now receive 100%, or 66% if he/she has lived in New Zealand for 30 years. Please note: this applies to retirement in countries only which have no reciprocal Social Security Agreements (SSAs) with New Zealand.
As already mentioned, when looking at the general situation and the blatant disregard for people receiving overseas pensions, it is hard to believe that the New Zealand government would have introduced the Special Portability rules for pure benevolence. Other facts show why it is cheaper to pay Pacific Islanders full NZ Super after 20 years of residence in New Zealand.
These nations have the highest obesity rates in the world, as a consequence of traditional values and poor diet, even supported by cheap fatty imports from New Zealand.
The people suffer from all obesity-related illnesses like type 2 diabetes, heart disease, stroke, osteoarthritis, asthma and some cancers. All this can lead to substantial disability, including amputations as a consequence of diabetes. If all these people stayed in New Zealand after retirement they would be an extreme burden on the public health system.
On the other hand obesity-related illnesses cause premature death, meaning NZ Super does not have to be paid for a very long time, if at all. Life expectancy is low. Some examples (based on the numbers published by the World Health Organisation WHO, 2008):
Samoa: men 66, women 70 years; 235/203 in 1,000 Samoans die before age 60.
Tonga: men 73, women 69 years; 114/208 in 1,000 Tongans die before age 60.
Cook Islands: men 71, women 75 years; 147/96 in 1,000 Cook Islanders die before age 60.
Niue: men 64, women 78 years; 236/81 in 1,000 Niuens die before age 60.
Fiji: men 66, women 72 years; 259/162 in 1,000 Fijians die before age 60.
According to a MSD report and Statistics New Zealand, in the period from 2006 to 2008 life expectancy at birth for New Zealanders was 78.2 years for males and 82.2 years for females. The report also says that there are marked ethnic differences. In the period from 2005 to 2007, male life expectancy at birth was 79.0 years for non-Māori and 70.4 years for Māori, a difference of 8.6 years. Female life expectancy at birth was 83.0 years for non-Māori and 75.1 years for Māori, a difference of 7.9 years. The numbers for Pacific Islanders in New Zealand are similar to Maori.