A happy man with four nationalities, currently residing in France, wrote us that it is well possible to harmonise different countries' different pension systems, and how Social Security Agreements (SSAs) can work:

"No problems with taxes or pensions, all under government treaties. I will only pay taxes in France where I live, and the pensions are combined when I retire."

He wrote: combined, not: deducted. In fact, they are added under the pension portability rules of the countries involved. (More about pension portability also on the Anomalies & inequities page - as exactly this happens because according Social Security Agreements often do not work as they are meant to, especially when one of the signing parties is New Zealand.)

Due to New Zealand's treatment of overseas pensions only eleven countries have signed Social Security Agreements with New Zealand. This includes the Channel Islands Jersey and Guernsey, counted as two independent nations, and since mid 2013 another political powerhouse: Malta.

The only reason for celebrating the roaring success of getting Malta into the boat seems to be making up the numbers of nations that have no idea what Sections 187-191 of New Zealand's Social Security Act are all about, and then pretend in talks with bigger nations that so many other governments have not had a problem signing the pensions of their citizens over to New Zealand.

On 29 October 2019 the eleventh agreement was signed with South Korea - as far as we can see, of course, with huge benefits for New Zealand. It includes the deduction of South Korean pensions in New Zealand. It is unbelievable how stupid some overseas governments are. While the agreement page says the treaty would come into force in 2021, the WINZ website (as of 25 November 2021) says it would come into force in 2022.

We have heard that negotiations have also been held with Croatia - and wonder why, as there is next to no financial benefit for any of the nations.

Here is the list of countries that have signed Social Security Agreements with New Zealand: Australia, the United Kingdom, the Netherlands, Canada, Greece, Ireland, Denmark, Jersey, Guernsey, Malta and South Korea. (In comparison, Canada has 51 SSAs, Germany 47, the United States 23 and Australia also 23.)

Most countries refuse to sign or ratify SSAs

New Zealand has attempted to establish more SSAs. To achieve one with the United States of America has highest priority, as mentioned in the Reviews of NZ Superannuation which were provided by the Ministry of Social Development (MSD). Other countries that have so far refused agreements despite New Zealand's attempts are Germany, Switzerland, Austria and Sweden. An agreement signed with Italy in 1998 (!) has not yet been ratified.

Several years ago the German Ministry of Work and Social Affairs (Bundesministerium für Arbeit und Soziales) let us know that "Germany does not intend to establish such an agreement". A direct connection to the Direct Deduction Policy was not confirmed but we were told: "The Ministry knows from experts of other countries about the problems of countries that have Social Security Agreements with New Zealand. The problem concerns the coordination [of contributory pensions] with New Zealand's tax-based social system."

In the meantime Germany has sent a verbal note to the New Zealand government, asking for negotiations. New Zealand declined - with good reason, as such a deal would include the end of the deductions and the indirect confiscation of German contributory pensions.

The 2007 MSD Review lists the issues other countries have with New Zealand's treatment of overseas pensions. It says that "some countries have suggested that New Zealand use alternative methods to share the cost of pension provision with other countries". And further: "In 2004 the Swedish Ministry of Health and Social Affairs informed MSD that it could not continue with negotiations towards a Social Security Agreement unless New Zealand undertook to modify the effect of Section 70 [Sections 187-191 since 2018], under which New Zealand residents covered by the Agreement would receive a proportional payment from New Zealand, and the Swedish pension would not be taken into account by New Zealand."

In return Kiwis are punished by some overseas countries

All this thanks to the mess New Zealand has created with its Direct Deduction Policy and Spousal Provision (abolished as late as 9 November 2020), and the incompatibility of contributory overseas pensions and New Zealand's state benefit that is not as universal as the New Zealand government pretends.

As a direct reaction to the application of Sections 187-191, for example, the United States has cancelled Social Security payments to non-Americans who retire in New Zealand.

For a start, Social Security Agreements are designed to allow people moving freely between countries. Their intention is to coordinate the social security systems of two countries, to eliminate residence and citizenship barriers of social security, and ensure that individuals who have divided their working life between two countries are not penalised.

In countries with compatible systems this is simple. And in many overseas countries, especially in Europe, it is not a big problem as they all have pension systems that are not all that different from each other. Contributory pensions are totalised, meaning: years of contributions are added and lead to one 100% pension because contributory (or: occupational) pensions are proportional, according to the years of contribution.

An example:

If someone has worked 15 years in France, 15 years in Germany, and 15 years in Spain, he gets one third of his pension from France, one third from Germany, and one third from Spain. The amounts of the respective pensions play no role and can be hugely different. If the contributions in France were lower than those in Germany, the amount is lower. If someone decided to work only 30 years in total, he gets a lot less money.

And now Zealand comes and wants such countries to sign agreements that would penalise people who have worked and contributed years and years to their pension funds in those overseas countries. It would add the years a New Zealander has lived and perhaps not even worked in Kiwiland (because NZ Super is not work- but residence-based) as a portion of contribution which should add up to a 100% contributory pension. This is impossible, as no country with contributory pensions would add years of residence as equivalent to years of work.

Overseas countries do not accept New Zealand's unilateral Direct Deduction Policy either, not to mention the Spousal Provision (abolished in November 2020) as the hugest inequity. They do not accept the inappropriate calculation of giving the moderate NZ Super payments the same weight as the often much higher overseas pensions every individual has paid for by compulsory contributions.

There would be a lot less trouble if New Zealand acknowledged overseas pensions as proportional pensions. And we know that the New Zealand government knows very well what this is because, under the Portability rules, it pays proportional pensions to Kiwis and departing residents who move overseas in retirement (with the exception of the United Kingdom and Australia).

Only eight other countries have universal pensions à la NZ Super

The only other countries in the world paying universal pensions that can be compared to NZ Super do not fall into the category of economic heavyweights: Mauritius, Namibia, Botswana, Bolivia, Nepal, Samoa, Brunei, Kosovo - and Mexico City.

It is easy to understand why Andrew Smith, an international tax expert from Victoria University in Wellington, comes to the conclusion: "Double Taxation Agreements normally work without problem; Social Security Agreements don't work because many people suffer significant disadvantages."

The papers of the Retirement and Research Centre (RPRC) of the University of Auckland even suggest that these agreements "do not function in an exactly reciprocal way". They give the residence rule that is applied in a different way in Australia as an example: "The Australian resident gets full NZS in Australia on completing 45 years‘ residence in NZ; for the Australian pension, the local 10(5) rule applies with NZ residence counting as if it had been in Australia." (Here is the DTA between Australia and New Zealand, and here FAQs from the Australian perspective.)

A similar outcome can be found in the SSAs with Denmark, Canada and Ireland. The agreements with Greece and Jersey and Guernsey vary slightly, as does the agreement with the Netherlands. (Links on this page: https://www.workandincome.govt.nz/pensions/travelling-or-moving/social-security-agreements/index.html)

No NZ Super payment in the United Kingdom

People who want to retire in the United Kingdom do not get NZ Super. They might be eligible for Britain's Basic State Pension which is - depending on the exchange rate - a similar amount to NZ Super. And British workers pay for it!

As all the other countries that have no SSA with New Zealand seem to get along well with their international treaties, the ball is surely in the New Zealand government's court to reform its pension system. It has to be adjusted as appropriate for people's modern-day migration patterns.

As times get tough and many countries have started to raise the pension age, we cannot expect that it becomes easier to establish SSAs if one of the partners is trying to rip off the other one, as New Zealand does with the help of Sections 187-191 of the Social Security Act. The opposite is the case in the face of ageing populations and scarce funds.

The Irish government is irritated

A pensioner couple of our "Victims Club" contacted the Irish government, asking for clarification about the treatment of contributory Irish pensions in New Zealand.

The answer they received from the Ministry of Social and Family Affairs in Dublin in April 2010 confirmed our view, as it questioned the legitimacy of Sections 187-191 (at the time Section 70) of New Zealand's Social Security Act:

"I confirm that the pensions payable to you both by this Department are contributory pensions on foot of social insurance contributions paid in respect of periods when you were employed in Ireland.

I confirm that both pensions are payable on foot of Irish contributions alone, and neither depend on the provisions of the Ireland - New Zealand Agreement on Social Security."

(See a copy of the letter under the main photo on this page.)

In other words: despite Ireland's Social Security Agreement with New Zealand - which allows the deduction of state pensions - the Irish government thinks that contributory pensions do not form part of this agreement and should therefore not be deducted from NZ Super.

"MSD authorities are fully aware of this information"

In a further exchange with a superannuitant living in New Zealand the Ministry of Social and Family Affairs in Dublin has confirmed in March 2011 that New Zealand's wide scope of the Direct Deduction Policy is unacceptable for the Irish government:

"Your e-mail to me enclosed a letter from me (file title: Contributory and non-contributory.tif) describing the Irish contributory pension and the nature of its funding.

The New Zealand MSD authorities are fully aware of this information, knowing that Irish non-contributory pensions are not exportable and that all Irish pensions payable to New Zealand residents are contributory."