The Direct Deduction Policy:

A bad Super surprise 

for immigrants and Kiwis

People entitled to the New Zealand pension, called New Zealand Superannuation (NZ Super), who also receive an employer/employee-funded overseas pension, are likely to be in for an unpleasant surprise: their overseas payouts will be deducted from their NZ Super. This is called Direct Deduction. The practice is governed by Sections 187-191 (formerly Section 70) of the Social Security Act. We call it a rip-off.

The consequence: someone who has been working and making significant contributions to compulsory employer/employee-funded retirement insurance schemes overseas for 15 or 20 years before moving to New Zealand, might not receive a cent of NZ Super even after living, working and paying taxes in New Zealand for 20 or more years. This happens if their overseas pension is higher than NZ Super - which the New Zealand government claims is universal. Others receive only a fraction of NZ Super after decades in New Zealand. 

Many of these people will struggle to make ends meet as they have to live on their overseas pensions despite having made huge contributions to the New Zealand tax base and society. They have paid for New Zealanders' NZ Super, only to miss out when it would be their turn to enjoy their golden years.

The New Zealand government is abusing other countries' contributory pension schemes

The New Zealand government uses respectively abuses other countries' contributory pension provisions for the payment of the tax-funded, universal NZ Super benefit. As of the official statistics of December 2023, it saves New Zealand more than NZ$ 566 million per year. In reality it is a lot more because only people, who receive a few dollars, are counted in the official statistic; those who miss out completely are not counted. 

We are speaking of officially about 100,000 affected pensioners. But counting those who receive nothing from New Zealand, we are at a number of about 160,000.

[When the Social Security Act 2018 came into effect after a re-write on 26 November 2018, Section 70 was re-numbered into Sections 187-191, 434; S. 70A became 192 - 194;  S. 70B became 195, 196; other relevant Sections: 69G is now 173 - 176 and 69H is 177 - 180. But the facts have not changed at all. Read and say it as you like.] 

Until 9 November 2020 it was even worse. If a person’s overseas retirement payment exceeded the NZ Super rate for one individual, the “excess” amount was carried over to their partner’s entitlement and deducted from his or her NZ Super. This was called Spousal Provision. In a worst-case scenario, one partner’s high overseas retirement income could cancel out a couple’s combined New Zealand pension entitlement. After many years of lobbying, including our massive efforts and the launch of this website in 2010, this spousal rip-off has ended on 9 November 2020. 

But don't hang your hopes too high: this part of the policy affected only 400 to 600 couples. For more than 100,000 pensioners - and probably as many as 160,000 - the deductions of their earned overseas pensions will go on.

The New Zealand government ignores calls for fairness

The Direct Deduction Policy affect not only immigrants but also a growing number of returning New Zealanders, due to increasing global mobility and international work histories. It has been identified as highly unfair, but so far no changes to the law have been made. As this rip-off makes NZ Super far more affordable for the Government, we do not expect any changes any time soon, whichever parties form the Government.

This website highlights a number of points why this is so, how the Government is trying to keep the issue off the agenda and what this does to the people affected by Sections 187-191 (formerly Section 70).

While there are many aspects of the New Zealand pension law that need to be addressed, the primary aim of this website is for employer/employee-funded overseas pensions to be exempt from abatement against the tax-funded NZ Super. Only overseas pensions similar to NZ Super, including tax-funded pensions for civil servants, should be deducted from NZ Super. 

We have only reached our first goal by New Zealand's government passing the New Zealand Superannuation and Veteran's Pension Legislation Amendment Bill on 24 July 2020. This included the end of the Spousal Provision which came into effect on 9 November 2020, instead of 1 July, the delay due to the chaos caused by COVID-19. The Spousal Provision was the most blatant breach of Human Rights and constituted discrimination on grounds of family status. But the fight goes on.

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Statistic on how much the New Zealand government cashes in from other countries, respectively how much it saves on the cost of NZ Super by ripping off immigrants and returning Kiwis, see at the bottom of this page.