To receive a New Zealand pension you have to apply for so-called New Zealand Superannuation (NZ Super) at Work and Income New Zealand (WINZ).

WINZ is a government agency, the community arm of the Ministry of Social Development (MSD), that tests your eligibility and calculates the exact amount you will receive. There are different rates for different circumstances depending on, among other things, whether you live alone, share your home with a boarder or live as a couple with your partner or spouse. What other circumstances WINZ takes into consideration and how the exact amounts for each rate are calculated is set out on the Superannuation pages of the WINZ website.

The requirements to qualify for a pension are fairly straightforward. You can get New Zealand Superannuation if

• you are aged 65 or over

• you are a New Zealand citizen or permanent resident

• you normally live in New Zealand

• you have lived and been physically present in New Zealand for at least 10 years since you turned 20; five of those years must be since you turned 50. (From 2024 the residency requirement will change, rising up to 20 years by 2042. See separate page.)

Please also read the page What WINZ wants to know, in order to not make tragic mistakes when filling out the application form.

You must apply for your overseas pension

If you’re eligible for a pension or benefit from New Zealand and overseas, you need to apply with both countries.

This is not an option but a requirement. It means: you cannot relinquish your right to an overseas pension by not applying for it. Even if you think it’s not worth the effort because your overseas pension is only very small or because you loathe the paperwork: you have to apply for it. WINZ insists on you claiming your overseas pension so they can abate it against your New Zealand pension entitlement (Direct Deduction Policy).

There is a special unit at the Ministry of Social Development (MSD), International Services, responsible for assessing the rate of your New Zealand pension payments if you are also entitled to an overseas pension, and they request written evidence from your overseas pension fund or government agency.

For privacy reasons, they are not allowed to communicate directly with the overseas pension providers (with a few exceptions when Social Security Agreements exist). But they will force you to do it and provide the paperwork or they will suspend your NZ Super payments - if you receive any after the deductions.

If you choose not to apply, you get a letter from WINZ, threatening to stop payment of NZ Super, as in this letter provided by an affected superannuitant:

"Thank you for notifying us [...] that you do not wish to complete the [specified overseas country] pension application.

Sections 173 - 176 [Section 69G until 26 November 2018] of the Social Security Act of the New Zealand law require that you take reasonable steps to apply for an overseas pension or benefit that you may be entitled to receive.

Please complete the [...] pension application forms and return to us by [date]. If we do not receive your completed application by this date, your New Zealand Superannuation will be stopped.

If this happens, you will need to provide us with the information we have asked for before your payments can start again. After 8 weeks of the suspension, you will be required to make a full application which will be declined if we still have not received the information that we require."

How WINZ calculates what you get – and if you get anything at all

Let’s look at how exactly WINZ calculates pensions paid to a couple. In the first scenario only the Direct Deduction Policy applies. In the second scenario, in addition to this, but thankfully a thing of the past, the Spousal Provision was included. And in the third example, we have construed a worst-case scenario where one partner was penalised for his/her other half’s pension by not getting a cent at all. (The latter two examples were examples of the Spousal Provision which was abolished on 9 November 2020. But they give you an idea how mean the system was and still is.)

Let’s take a married couple who live together, Joe Anybody and Lotte Schmidt, both 65. Lotte receives a German pension. They qualify for the “married rate”.

To make the examples easy to understand and to eliminate any arithmetic challenges and future increases of the amounts paid, we are using an approximate payment of NZ$ 250 per person per week.

The actual rates vary, depending on each couple’s circumstances, currency fluctuations when calculating their overseas portion of the total payment, bank fees, and their tax status. However, the differences are insignificant for the purpose of explaining how the calculation works. To further simplify the examples, we have converted weekly or fortnightly payments to monthly payments (by defining a month as four weeks).

The couple’s weekly NZ Super entitlement at the “married rate” is NZ$ 500 for both, or NZ$ 250 each. This equals NZ$ 2,000 per month for both, or NZ$ 1,000 each.

Scenario 1

Lotte gets a German pension which is less than her New Zealand pension entitlement, for example the equivalent of NZ$ 400 per month.

Lotte’s monthly German pension is deducted from her NZ Super.

Her own monthly entitlement is 1,000 – 400 = NZ$ 600.

Joe’s monthly entitlement is NZ$ 1,000.

Result: their combined monthly New Zealand pension is: 600 + 1,000 = NZ$ 1,600.

Scenario 2 (not applicable anymore since 9 November 2020):

Lotte gets a German pension which exceeds her New Zealand pension entitlement, for example the equivalent of NZ$ 1,200.

Her own monthly entitlement is 1,000 – 1,200 = NZ$ –200.

She gets nothing from WINZ, because her overseas pension is “too high”, exceeding it by NZ$ 200. To add insult to injury, her negative balance is carried over to her husband’s entitlement.

So Joe’s entitlement is only 1,000 – 200 = NZ$ 800.

Result: their combined monthly New Zealand pension is NZ$ 800.

Scenario 3 (not applicable anymore since 9 November 2020):

What happens if Lotte has had a good job overseas, with a decent salary, and has paid in a lot in compulsory pension contributions to which her employers have contributed, too? What if her monthly German pension entitlement is equivalent to, say, NZ$ 2,000 or even more?

Right. She gets nothing from WINZ, and Joe gets nothing either because Lotte’s negative carry-over balance completely cancels out his individual entitlement.

And WINZ? Must have had a wide grin on their face because directly deducting overseas pensions from a person’s NZ Super entitlement, and even extending this practice to their spouse’s entitlement, was a really smart trick.

NZ Super and tax

New Zealand Superannuation is taxable income. It is paid out after tax has been deducted.

There are two net rates at which NZ Super is paid:

- tax code M if NZ Super is the primary income (M for main or most);

- tax code S if the recipient has also other income (S for secondary or supplementary) and a tax rate of 21%.

NZ Super must still be accounted for on a tax return. Any other income is also taxable at the individual tax rate.

Unlike all other state-funded benefits, such as the unemployment or domestic purposes benefits, NZ Super is paid on an individual basis, and takes no account of a spouse’s income.

Recipients are taxed as individuals. This means that, for a married couple, each receives a separate amount, and each must declare their amount separately to Inland Revenue (IRD).

Therefore it is technically incorrect to talk of a ‘married couple’ rate. There is only the individual ‘married person’ rate, which can, of course, be doubled to obtain the total household income.

So considering a couple an “economic unit” for the purpose of applying the Direct Deduction Policy and Spousal Provision rule - which thankfully was scrapped on 9 November 2020 - for overseas pension defied all logic.