Serious and satirical solutions
If a couple have been happily married for 40 years or more it is strange to tell them that they have married the wrong partner.
This is as strange as telling you that you should not fall in love with:
1. a Kiwi if you are entitled to a nice contributory overseas pension because at old age you will, under certain circumstances, have to pay for his pension, too;
2. a foreigner or returning Kiwi with a good overseas pension because this could cost you your entitlement to NZ Super.
Do not fall in love with someone who has an overseas pension
So the first tip about how to avoid poverty at old age would be: make a runner when an attractive middle-aged man or woman who causes this "butterflies in the stomach" feeling tells you about his or her successful professional career in an economically successful overseas country. 15 or 20 years in a good job overseas can easily mean that this person is entitled to an overseas pension amounting to two NZ Supers, and this means that thanks to Spousal Provision you will not get any NZ Super.
Best to choose a millionaire
Either choose a 20-something mail-order bride who has nothing to lose, a young person who has just started his or her career and will bring an entitlement as small as NZ$ 50 per month, or choose a millionaire. In the latter case you do not have to worry about NZ$ 1,000 more or less every month.
We have to drop the following tip because the Ministry of Social Development has started to deduct a non-eligible pensioner's overseas pension from a New Zealander's NZ Super, leaving her with NZ$ 6 a week. This would leave the couple with the partner's modest pension of about NZ$ 15,000 per year - while a Kiwi couple without overseas pension cashes in about NZ$ 32,000 a year. Only a lotto win can save this marriage which will otherwise end in divorce for financial reasons, courtesy of MSD. (The deduction of a non-eligible partner's overseas pension has been sneakily added to MSD's website on 14 January 2016.)
If you are over 65, receive NZ Super and still have fallen in love with a stranger, consider moving to a country with which New Zealand has no Social Security Agreement, and if a Social Security Agreement exists, don't go to Ireland, Greece, Jersey and Guernsey, the UK and Australia. Best avoid falling in love with a Pacific Islander, too. If you encourage your new flame to move to New Zealand, you might lose your NZ Super entitlement, just as Ruth who has married the wrong man 40 years earlier.
Move to your partner's country if no Social Security Agreement exists
According to MSD, "under the General Portability rules, the proportional rate of payment is not reduced by the amount of overseas pension that a person receives but is reduced to take into account periods where a person has not resided in New Zealand". This means that you receive proportionate NZ Super reflecting the time spent in New Zealand (1/540th of NZ Super for every month, tax-free).
Never forget your list of Social Security Agreements
Always carry a list of countries that have Social Security Agreements with New Zealand in your pocket when you go out at night. Or put it next to the computer if you are into online dating. On the other hand: if you are serious about dating you could learn the list of SSA countries by heart in a breeze; the list includes only nine countries plus one the New Zealand government has made up to make the list look longer.
Just visit and keep the pot boiling
But now let's get serious - and back into the relationship with a pensioner from an overseas country. He/she might live in the same street, and life's circumstances have brought you together at old age. Better you think twice about moving in. Why not just visit and keep the pot boiling?
You don’t have to be Jean-Paul Sartre and Simone de Beauvoir to find joy, or some other benefit, in living apart as a couple. We don’t want to be seen as advocating it either. But there are many couples living apart for other reasons than marital strife. While most separate living arrangements are work-related, there can be many other reasons not to reside under the same roof. One such reason could be that it avoids being ripped-off by becoming a victim of the Spousal Provision rule.
To cover the cost of running a second house (on condition that the mortgage is paid off) you could get a lodger in, as you would be visiting your partner most the time. This would only incur a small deduction from your NZ Super, you could enjoy your retirement - and the lodger your absence most of the time.
When staying together just doesn’t make financial sense
Of course, relationships can also work out the other way round. So let's say, the marriage with your overseas pension recipient (or you are the one with the pension and your partner a lifelong New Zealand resident) has broken down, and you only continue to live with your spouse for the sake of keeping up appearances, or if you just haven’t got round to moving out because it is such a hassle: give it some sober thought. It won’t save your marriage but it might save you from WINZ applying the Spousal Provision rule.
When married couples become flatmates
MSD let us know in their response to our OIA request (18 March 2016) that divorce is not necessary if a couple whose marriage has broken down live together as flatmates only. They wrote: "When a client's change in circumstances arises, they are required to notify the Ministry as soon as they can. This ensures their record is kept up to date and they continue to receive the correct benefit payments. A client can notify their changes by contacting the contact centre or notifying staff on site. A client is asked to fill in the 'change in personal details form' at the site and the records are updated accordingly."
This means: if you stay married and become friends, you can keep living together and both receive NZ Super (shared rate). The overseas pension will be deducted from the individual's NZ Super who receives the overseas pension, the spousal deduction will cease.
Why a fake divorce will not work
We do explicitly NOT recommend to divorce if you are happily married, just for the sake of saving your overseas pension from being deducted from NZ Super. If you keep on living at the same address but try to convince WINZ that you are no longer a couple, you can be sure that WINZ will investigate you. We do not know if they hide in the shrubs near your property, camp inside your neighbour's wheelie bins with food supplies for a fortnight, or what other methods their 450 investigators use to find out if you go out together, walk hand in hand, share BBQs in the garden. They will spy on you even if this causes higher costs than gains. It is impossible to pull such an orchestrated life through over an extended period, it adds significantly to the existing stress caused by the anger of being ripped off by the state.
WINZ will also find out about changes in your personal life that you do not report, as required. Meaning: you have to tell them when you marry or move in with someone with overseas pension. You surely do not have to inform them about your new-found love with the overseas pensioner next door. As far as we know, out-of-house sex and other forms of intimacy do not yet lead WINZ to apply Section 70 of the, uhmm: Act.
Just to publish the information MSD has given us on this topic on 18 March 2016: "The Ministry has not hired any private investigators or hired additional staff to look into pensioners with overseas pensions."
Anyone working in the USA should seriously consider acquiring US nationality to protect future entitlement and payout of US Social Security against the non-portability legislation of the USA when someone moves to another country that does not have a Social Security Agreement with the USA, e.g. New Zealand. Becoming tax-liable in the USA is merely a consequence and protecting payment of 80% of a pension is worth more than avoiding a 20% tax liability.
If you have worked in New Zealand most of your life and want to retire in Australia, this could become a hard hitting boomerang. Due to the Social Security Agreement between the two countries, you have to apply for Australian Age Pension. This is income- and asset-tested. So it is highly likely that you do not qualify for it if you move to Australia with savings and assets. If this is the case you will not get any NZ Super, as the amount New Zealand would pay must never be higher than Australian Age Pension. You can travel for up to 26 weeks without risking the loss of NZ Super.
For the nitty-gritty aspects of German pension entitlements and how they relate to citizenship, see our German pages.
Think twice before continuing to make voluntary contributions to the state pension fund of your country of origin to increase your pension entitlement. It might backfire in two ways:
1. If you draw an age pension, WINZ will deduct it from your NZ Super entitlement. It can take forever to get a confirmation which part of your overseas pension is from compulsory and which part is from private contributions. Only then you might succeed to convince WINZ that they can only deduct a part of your overseas pension from NZ Super.
2. If you are entitled to and decide to apply for a lump-sum refund of your contributions, you may only get back part of what you have paid in. This is the case for German pensions. Any refund is only 50% of contributions, even if voluntary contributions were not made on a 50/50 employer/employee basis but were 100% self-funded.
Such private funds are not deducted from NZ Super. But you have to think hard in which of the countries you save. You might get out more from an insurance in your country of origin but the exchange rate might make you lose money in the end if you want to spend it in New Zealand. If you are lucky you make huge gains - but you just do not know when you start paying your contributions.
Another danger is that a government suddenly changes its policy. In Germany, for example, since 2005 you have to pay tax on superannuation above a basic tax-free amount, the tax-free rate getting lower and lower until those people retiring after 2040 have to pay tax on 100% of their superannuation; government-supported saving schemes and subsidies, as well as tax-deductible provisions were scrapped.
In New Zealand the Government could get the idea to introduce means-tested pensions, and KiwiSaver would suddenly become part of your taxed income, or could impact your entitlement to NZ Super. We do not want to be scaremongers but we, first, do not trust politicians, and second, we cannot imagine that any superannuation policy can be upheld for a century.
Please send us tips
Both authors being Germans, we know, by nature, best what Germans can or cannot do to avoid the worst when walking into the New Zealand pension trap. But, of course, the problem affects many other nationals, too, and there might be particular rules we do not know about.
If you have tips how to avoid falling deeper than necessary that might be helpful to other nationals, please drop us a note.
Please include references and/or links so we can have a look at it. As we are no international tax, pension or immigration specialists, we can only publish such information if we are able to double-check it.
Sherlock Winz Holmes
Under the heading “Maintaining the integrity of our benefit system”, the Ministry of Social Development shares some interesting figures with the public. The MSD spares neither cost nor effort to hunt down those they suspect of benefit fraud:
- investigated more than 26,400 cases of potential benefit fraud
- compared more than 22 million records through data matching with other agencies to detect incorrect benefit payments
- been successful with 95 per cent of the benefit fraud cases we've prosecuted
- developed a specialised integrity and fraud awareness resource to ensure staff know what is required of them in maintaining the integrity of the Ministry and its payment systems
- concentrated on identifying fraud risk and used the knowledge based approach in our field work."
(Source: Ministry of Social Development, annual report 2008/2009)
We think it is surprising that with such a high success rate of detecting benefit fraud the MSD is not able to spot its own wrongdoing.