Working beyond retirement

Joachim Rehbein: No acknowledgement for paying about NZ$ 450,000 in taxes over the years in New Zealand. And that was before retirement.

Who would ever think of such a mean trap?

By Joachim Rehbein

I came to New Zealand in July 1983, almost 27 years ago [story written in 2010]. Originally from Bremen, a port city in northwestern Germany, we are now firmly settled in North Shore City. My wife and my son studied at the University of Auckland and I can say we have made New Zealand our new home. We enjoy being part of our local community and everything seemed to go well for us until last year, when I reached pension age.

I graduated in Mechanical Engineering in Germany. In New Zealand I worked as a sales engineer and sales manager for a number of New Zealand companies. For eight years I was managing the New Zealand subsidiary of a German technology firm. So for nearly all these years I was gainfully employed and paid taxes in New Zealand. In other words: New Zealand has benefited from my working here for 26 years.

Before I turned 65 in May 2009, I had already filed applications for my pensions: from the German Pension Insurance, a scheme into which I and my employer had paid for over 15 years, and one from WINZ because I qualified for NZ Super. I duly received, and still receive, my German pension amounting to just over 600 euros a month. I also received New Zealand Super – but only until the end of June 2009 when my pension payments from Germany started. Then WINZ stopped all payments.

Decisions against all logical thought

I was disappointed. Having paid my share of taxes for 26 years, I could not believe that I was not entitled to get anything in the way of a state pension. It was only then that I found out about the Direct Deduction Policy, but I still thought there must have been an error or maybe a misunderstanding.

As I was under the illusion that the Ministry of Social Development and its agencies, such as WINZ, would be open to logical arguments, I asked for a review. The result was negative.

It is just absurd that my German pension, which I have earned by making contributions for just over 15 years, cancels out my entire NZ Super, for which I have paid 26 years in taxes. To me the MSD attitude demonstrates that conventional wisdom and commonsense are turned on their head. I now refer to the Ministry of Social Development as Ministry of Unsocial Development (MoU-SD) because apparently social fit and contributions to society count for nothing.

A hit in the pocket and a blow to my belief in a fair system

The effect this has had on our lives is quite significant. To make ends meet living on my German pension, savings and investments that have been generated 26 years ago, I am still working as a consultant to my former customers, and we have to watch our spending carefully. It is not the kind of retirement we had expected based on information from official sources which we now know was incomplete. It is not the kind of retirement that would allow me to enjoy the fruits of my labour and contribution to New Zealand society.

Apart from the financial consequences, the emotional effect this has had on our family is even more negative. Personally, I feel disappointed and deprived of my income.

Back in 1980, when we first started researching how things work in New Zealand to make an informed decision whether to emigrate to New Zealand, we were told we would be entitled to NZ Super after fulfilling the residency requirement.

This information was correct, but it was not complete. Nobody told us that my German pension would be deducted from NZ Super. And as this practice is so preposterous, the idea to ask about it would have never crossed my mind. Nobody would have thought of such nasty treatment, ever.

A hypothetical numbers' game

Being an engineer and used to working with numbers, I could not resist doing the sums to find out how much a person will be losing over his or her years of retirement. Assuming that in 26 years of employment that person earned NZ$ 1,500,000, and assuming an average tax rate of 30%, i.e. NZ$ 450,000, and that 20% of tax, or 6% of a worker’s income, is earmarked for NZ Super, then NZ$ 90,000 were tax which contributed to NZ Super and should be available to pay for a New Zealand pension. However, if submitted to the Direct Deduction Policy, that person is getting none of it.

Had the Government invested these NZ$ 90,000 at 6% interest during the 26 years, this amount would have increased to NZ$ 185,000. Depending on life expectancy and how much longer this money could have earned interest, these funds could have grown exponentially in another 20 years to about NZ$ 600,000.

My tax and potential returns from investments, had this money been properly managed, are lost for me. I have paid taxes and funded other people’s NZ Super but I am not allowed to reap any benefit myself. Drawing the balance I must state that I am out of my calculations because one important variable was incorrectly provided to me. Yet I am not getting a credit note either for the trust I put in New Zealand's Ministry of Social Development.

(Story written in 2010)

(Last update: Nov. 2021)

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