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Spousal Provision

The most dramatic breach of Human Rights
Nothing highlights the inhumane and uncaring treatment of pensioners in New Zealand better than the Spousal Provision. This money-grab tool, introduced in 1985, is part of Section 70 of the Social Security Act which allows the Chief Executive of the Ministry of Social Development (MSD) to rule that about every pension of the world is similar to NZ Super and therefore deductible from New Zealand's state pension, NZ Super.

The Spousal Provision goes further than just confiscating an overseas pension. It also robs New Zealanders who have never left the country of a part of or of their entire NZ Super. This happens when they are in a relationship with someone whose overseas pension is higher than NZ Super. The couple becomes an "economic unit" and the single overseas pension is deducted from the couple's combined NZ Super. 

Pensioners with an overseas pension - which is always a partial pension, as it was accumulated by individual contributions in the years this person lived overseas - have to pay twice for their pension: once while working overseas, the second time they have to fund their own NZ Super, and on top of it they pay for their partner's NZ Super. And while living and working in New Zealand they have also funded other New Zealanders' NZ Super by paying taxes. Later they are denied NZ Super.

The hidden income-test of immigrants and returning Kiwis

While not a single New Zealander who is married to someone without overseas pension is income-tested when claiming NZ Super, these pensioners are. Were they not in a relationship with an immigrant or a returning Kiwi but to a New Zealander who has never left the country, they would receive the full amount of NZ Super.

This means that the application of the Spousal Provision constitutes discrimination on grounds of family status and therefore is in breach of Human Rights.

Let's talk about Mary...

The absolute perversion of this law - which is unfair and discriminatory in itself - is the treatment of New Zealanders who move overseas in retirement. The case of Mary (name changed because her case currently is in front of the Human Rights Commission and will almost certainly go to the Human Rights Tribunal) highlights everything that is wrong with Section 70 in general and the Spousal Provision in particular.

Mary married a German man late in life and moved overseas to be with him. This man has never lived in New Zealand and therefore isn't eligible for NZ Super. However, his German pension is deducted from Mary's NZ Super, leaving her with NZ$ 6 (six!) a week. (Due to the exchange rate the amount can go up a little but also go down to zero.) MSD even told Mary that nothing would change if she moved to New Zealand and her husband stayed overseas. They would continue to treat them as a couple and she would still receive NZ$ 6 per week.

The marriage broke down under this pressure. No couple can live on one NZ Super, and surely no individual can live on NZ$ 6 a week. The separation - which led to Mary receiving NZ Super again - was forced upon the couple by MSD. Congratulations, MSD!

The definition of couples, according to MSD

This is surely an extreme case, due to the couple's residence overseas. If they lived in New Zealand, Mary could include her husband as a non-qualified partner in her application for NZ Super, and they would receive the married rate for such couples - which is slightly lower than the married rate of two fully qualified individuals. The husband's overseas pension would be deducted from their combined NZ Super and not just from her single NZ Super.

The Ministry tells couples where one partner receives an overseas pension that a married couple is expected to support each other financially. But why does it apply only to people where one partner paid into a superannuation scheme overseas? Why are people who often live on a minimum income punished while New Zealand millionaires and their partners living in mansions are both entitled to full NZ Super?

Clearly the “single economic unit” expectation is only apparent where overseas pensions are involved. It is an attempt to scale down the universal character of NZ Super and make it look as if NZ Super were a special needs benefit. If this were the case, every couple would need to be income-tested, and NZ Super should surely not be paid to millionaires.

The discriminatory factors are clear:
  • Only couples with overseas pensions and their partners are income-tested while lifelong New Zealanders are not.
  • Only couples with at least one overseas pension are treated as a single economic unit while lifelong New Zealanders are not.
NZ Super and ACC are based on individual entitlement

The New Zealand tax system is, and this is a quote from a study of the Child Poverty Action Group, “founded firmly on the premise that it is the individual who pays tax, not an aggregated unit such as the couple or household. […] Just as the tax system is based upon an individual as the unit, so are many parts of the welfare state. New Zealand Superannuation (NZS) and earnings-related Accident Compensation are based on individual entitlement. This means that the amount paid to the individual is not affected by the income of a partner and is taxed at the individual’s tax rate…”

In New Zealand law the only benefits affected by the single economic unit rule are income-tested benefits such as Jobseeker Support - and NZ Super only when a pensioner wishes to include a non-qualified spouse in his/her application. A non-qualified spouse might, per definition, be under 65 years old or not have fulfilled the residency requirement of 10/5 years.

The latter example highlights the injustice of Spousal Provision even more drastically. While a couple with a non-qualified spouse receives close to the full amount of NZ Super (married rate), a fully qualified New Zealander married to the "wrong" person receives a fraction of it, or nothing, and the partner with the overseas pension who is also fully qualified after living in New Zealand for ten years receives NZ$ 0. Zero.

Punishment for pensioners who live with the "wrong" partner

There are couples with a non-qualified spouse who received NZ$ 562.60 a week (rate as of 1 April 2016) while a couple, both fully qualified for NZ Super, received NZ$ 40 or NZ$ 200 or nothing at all every week. This is a difference of up to NZ$ 562.60 a week, just because someone has married someone who was forced by an overseas government to save for his/her retirement by making huge contributions into a compulsory superannuation scheme, and the contributions directly deducted from their wages and salaries.

Where is the fairness, where is the justice?

Instead the Government's spin continues, the facts are misrepresented and pensioners complaining about the deductions are bullied. The New Zealand public is made to believe that the Government is incredibly generous by topping up lower overseas pensions to the level of NZ Super, so everyone receives a “minimum government-provided standard of living”. The opposite is true, as NZ Super is reduced by deducting the overseas pension. It is an exercise to save money for the New Zealand government. 

The Government's spin of "No-one must be better off..."

The Prime Minister and his ministers say that nobody must be better off than a New Zealander who has never left the country, and that nobody who has not made “a fair and equitable contribution via their working life to the New Zealand tax base and to New Zealand society” should receive full NZ Super.

New Zealanders who happen to be in a relationship with someone with an overseas pension have surely made a fair and equitable contribution to the New Zealand tax base and to New Zealand society during their working lives. Or they have raised children and done considerable volunteer work. 

Exactly the opposite of what the Prime Minister and his ministers say is true: New Zealanders fortunate enough NOT to be married to someone with an overseas pension are better off than immigrants and returning Kiwis whose overseas savings are legally stolen. 

Ordinary Kiwis reap the benefits of never having contributed to compulsory superannuation schemes. They can invest the money people overseas were forced to set aside for their retirement into property, shares, life insurances, private pension schemes etc.

It is like paying a 100% income tax on overseas earnings

Deducting contributory overseas pensions from both partners' NZ Supers is like paying a 100% income tax on earnings from overseas – which is ruled out by New Zealand tax laws and tax rates, and by the Double Taxation Agreements (DTAs) New Zealand has with many countries.

But it gets even crazier: If someone were married to an Australian or a Chinese pensioner these partners' contributory overseas pensions would not be deducted from NZ Super because of, in the case of Australians, an unbelievable Social Security Agreement between the countries; in the case of the Chinese the cheap excuse is used that Chinese pensions are not administered by the state but by local authorities and that "there is no agreement" to do so. As if there were any agreements with the countries whose contributory superannuation schemes are misused for the funding of NZ Super!

By making a pensioner with an overseas pension pay for his/her own and his/her partner's NZ Super, New Zealand evades cost-sharing with other countries and leaves retirement provision even for its own citizens who might never have left New Zealand, entirely to other countries.

The myth of giving everyone a fair go

In no other country of the world would anyone deduct an overseas pension unless it is a state pension and unless it is agreed upon in a Social Security Agreement. In all other countries of the world occupational superannuation payments are added up if a person has contributed to compulsory schemes in different countries. 

New Zealand is the only country in the world that deducts such employer/employee-funded pensions from its state pension. But declaring a compulsory overseas pension a state pension based on the regularity of the payments and the nature of the administrator does not make it any more similar to NZ Super.

New Zealand, the friendly country that gives everyone a fair go. Yeah, right! It is the only - more or less civilised - country that punishes people for loving the "wrong" person.





MSD's page of shame
On this page you find the deduction examples listed by the Ministry of Social Development. Examples three and four are about the application of the Spousal Provision. 

Example four, the deduction of a non-eligible partner's overseas pension - which is the scenario that applies to Mary in the main text on this page - has been sneakily added to MSD's website on 14 January 2016.



What you can do
Think twice about getting into a relationship with someone who receives an overseas pension, be it an immigrant or a returning Kiwi, if you are not wealthy and/or have no other retirement income than NZ Super and the overseas pension. You could fall into a terrible poverty trap at old age, just when you think the golden years have come.

We have listed some tips on how to avoid the worst on a separate page.



Labour didn't "find" the money
Subsequent governments have failed to stop the punishment of pensioners for being in a relationship with the "wrong" partner. But Labour had the best chance to do it.

Ruth Dyson was the Labour minister in charge who could forward the good news that Cabinet had agreed on 23 October 2007 to scrap Spousal Provision - and the bad news that the change of policy was subject to the availability of funding. This "was not found" in the Budget 2008. 

The dire consequence of this unsuccessful search for money was that the National Government distanced itself from this agreement when Labour got swept out of power at the end of 2008, and the fight for justice had to start at the very base all over again.
 
We should not forget that the Labour Government did not find less than NZ$ 2 million the abolition of the Spousal Provision would have cost at the time, but it found the funding for major tax cuts before the 2008 election. 



Read some of the victims' stories based on Spousal Provision:


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