What is a pension?

Dark clouds over New Zealand: MSD obviously thinks people with overseas pensions are not taxpayers.

Quote from an email from a senior MSD official:

"It is not an unreasonable expectation, considering that New Zealand Superannuation is funded by the New Zealand taxpayer, that New Zealand Superannuation is paid only to those people who are initially entitled to it and payment continues to be made only to those who meet certain requirements for ongoing entitlement.”

Oh yes, we completely forgot that migrants and returning Kiwis should only be allowed to pay with their taxes for the pensions of "real" Kiwis, civil servants, retired MPs and foreigners exempt from the Direct Deduction Policy for mysterious reasons...

Between social welfare and Stasi-like control

By Sissi Stein-Abel

Retirement Commissioner Jane Wrightson started an opinion piece in the Sunday Star Times on 14 November 2021 with the question: "What is the point of a government pension?”

Working on the issue since early 2010, the answer in the case of NZ Super is clear to me: it is a social welfare benefit paid to millionaires although labelled as an entitlement by the Government.

If NZ Super were a proper pension, people would receive it however long they travel overseas, and they would not have the denigrating duty of informing WINZ about their travel plans before leaving the country and report back to them upon return.

“Proper” pensions – and in this context I use the term for employer/employee-funded pensions that are paid in most civilised countries – are paid wherever you are because you have earned them during your working life.

NZ Super doesn’t even qualify for “a kind of” proper pension because it does not even reward everyone over 65 for contributing to the tax base and society for decades. Many people with employer/employee-funded overseas pensions which they earned before moving to New Zealand do not receive a cent of NZ Super after living and paying taxes in New Zealand for 10 years, and they will not receive any of it after 20 years either.

A pension is not a pension if people are made prisoners in their own countries (and in some other countries as well, e.g. the Netherlands, where people cannot move across the border to Germany because New Zealand stops its share of the pension payments).

When people want to travel for more than 26 weeks, they have to apply for Portability (like when leaving New Zealand permanently) and will receive proportional NZ Super payments, according to the time spent in New Zealand between ages 20 and 65, so born-and-bred Kiwis will still be able to receive full NZ Super. Overseas pensions will not be deducted, so those who miss out on NZ Super while living in New Zealand, will suddenly receive proportional NZ Super on top of their overseas pension if they travel longer than 26 weeks.

A pension is not a pension but a social welfare benefit if payments are stopped after a certain time, like in other countries which pay contributory pensions to people residing elsewhere but would not export social welfare benefits. The latter are means- and in some countries also asset-tested.

In the case of NZ Super people receiving overseas pensions are means-tested despite the Government denying that the deduction of overseas pensions from NZ Super dollar-for-dollar is a means-test. What else is it? A 100% tax on overseas pensions? I don't know any other country with a 100% tax rate on certain incomes. And why are only people with overseas pensions they have worked for and which are earned, means-tested and not everyone who reaches pension age, including millionaires who don’t even need the pension?

The Retirement Commissioner was correct in saying that New Zealand’s “pension policy is rooted in the idea that New Zealanders will never live or work overseas”, and also correctly asked: “How feasible is that in the twenty-first century?” The Direct Deduction Policy dates back to 1938!

And if this weren't bad enough, how can New Zealand rip off its own citizens who are moving to Australia by probably the meanest agreement of all? Many New Zealanders would not receive a cent of NZ Super in Australia because New Zealand only pays as much NZ Super as the amount of the means- and asset-tested Age Pension an NZ pensioner would receive in Australia.

In return New Zealand tops up the Age Pensions of Australians who move to New Zealand after age 65 to the level of NZ Super! Why? Because this saves the NZ government a lot of money, as eight times more Kiwis live in Australia than Australians live in New Zealand, so topping up a few Age Pensions is much cheaper than paying full NZ Super to eight times as many New Zealanders in Australia.

Jane Wrightson was right again to say that a principles-based approach was needed. But the principle can’t be that pensioners who have worked here for decades are left behind and do not receive a cent of NZ Super for contributing to New Zealand for many, many years, and the principle can’t be – as long as overseas pensions are deducted – that the type of administration of identical overseas pensions can decide if a pension is deducted or not, and that mysteriously Chinese pensions have never been deducted despite being administered “by or on behalf of” the Chinese government for much longer than the New Zealand government admits.

On the other hand the Government has been paying and is still paying NZ Super to persons who have lived in New Zealand for a very short time and/or were under 65 years old - and despite the law being changed in November 2020 and there are no more pensions paid to non-qualified partners, they have to keep paying it to 6,300 couples (as of June 2019) until they die or split up - whatever comes first...

At the same time many people who are fleeced by means of the Direct Deduction Policy have to work well into retirement to make ends meet because they can’t survive on the equivalent amount of NZ Super alone when they do not receive a cent of NZ Super and the money they live on is superannuation from the time before they set foot into New Zealand. Someone I know who worked overseas for 20 years has only now handed in her resignation at age 73.

"It is not an unreasonable expectation..."

I also had a little email exchange with a senior official of the Ministry of Social Development (MSD). He wrote:

“You appear to suggest that the rules governing entitlement to New Zealand Superannuation are unfair. However, it is not an unreasonable expectation, considering that New Zealand Superannuation is funded by the New Zealand taxpayer, that New Zealand Superannuation is paid only to those people who are initially entitled to it and payment continues to be made only to those who meet certain requirements for ongoing entitlement.”

I answered:

I do not suggest that the rules governing entitlement to NZ Super are unfair as everyone who has lived in New Zealand for 10 years is entitled to NZ Super. I even think it is too generous to pay full NZ Super to people who have resided here for 10 years only and were not even required to work and pay income tax. As you and I know, this issue has been addressed by the Government which will soon raise the residency requirement to 20 years. I do not even consider this a perfect solution to a persisting problem that creates unfair outcomes for so many pensioners.

When you say that NZ Super is funded by the New Zealand taxpayer, that includes all immigrants, they are taxpayers, too, and they continue to pay tax even during overseas holidays and family emergencies.

What I find unfair is the Direct Deduction Policy – and this is not your fault, so please take nothing of this personally – because there are people who have lived and worked in New Zealand for 25 or more years and do not receive full NZ Super or no NZ Super at all despite having paid taxes all this time.

New Zealand abuses contributory overseas retirement schemes to make NZ Super more affordable for the Government and the taxpayer – but only for those taxpayers who have not worked overseas. Those who have worked hard overseas before coming to New Zealand are only “allowed” to pay with their taxes for the NZ Super for people who might never have worked anywhere. Not receiving any NZ Super after working 20 or more years in New Zealand is unacceptable.

I also find it questionable what pensioners (including born-and-bred New Zealanders who have never left the country) are required to do to continue receiving NZ Super. Having just looked over an NZ Super application form because someone asked me questions about it, I could not believe my eyes when I saw that they are required to inform WINZ/MSD if they intend to travel for more than four weeks.

I thought the updated rules about travel for over and under 26 weeks were clear enough. If MSD needs to know how long someone is not present in New Zealand, why not just have automated reports from Immigration NZ and spare the pensioners the denigrating call to report to WINZ/MSD what they are doing in their spare time and golden years of their lives?

Please allow me to be perhaps a bit over-sensitive on this topic. But I am from Germany and remember the Stasi times in former GDR all too well. People under 65 were not allowed to travel to their relatives in the West, and the over 65-year-olds had to apply for a visa which usually was granted, and also a specific amount of money they were allowed to exchange. No-one who could not stay with relatives could afford to travel to the West anyway.

And then you move to a country at the other end of the world that prides itself of its friendliness and laid-back attitude, and pensioners have to report to MSD on every move they make, if they travel for more than four weeks, if they have a sexual relationship with the other person in their household or if they are only flatmates. I find this depressing.

What I also find unfair is that e.g. some pensioners who move into agreement countries overseas become prisoners in the countries of their choice resp. home countries. This is e.g. the case with Australia which doesn’t pay more NZ Super than Australia would pay to this person under its income- and asset-tested state pension regime. And New Zealand stops paying its share of the pension if someone moves from the Netherlands to Germany.

Neither do I like the constant threats that someone has to pay back their entire pension if they stay away longer than 26 weeks without telling WINZ. Why not only the weeks on top of the 26 weeks? (And please let me note that I am happy that MSD has revised their stance on pensioners stuck in Australia – and elsewhere – just recently. But the threat should not have happened in first place.)

Insert, 4 February 2022: Reports in the NZ Herald - e.g. this one: https://www.nzherald.co.nz/business/covid-19-miq-lockout-ministry-of-social-development-wants-16k-back-from-kiwi-couple/IRUE3RPBORGTI5S574DDQQK2WQ/ - and from affected pensioners indicate that MSD keeps stopping NZ Super payments to pensioners stuck in Australia after 30 weeks and demanding the entire payments back. Just a reminder: these pensioners are stuck there through no fault of their own but because the NZ Government shut the border with its MIQ lottery. It is inhumane and scandalous behaviour by MSD and a government that allows its civil servants to act like this.

The fact that this happens at all is proof enough for me that NZ Super is not what it claims to be. Treating pensioners like naughty children suggests that NZ Super rather is a social welfare benefit and not a real pension, because if it were a real pension you would receive it as an entitlement and acknowledgment of your lifelong work and contributions to the country, just the way you receive a German, French, US etc pension wherever you are and whatever you do. (They would not export a social welfare benefit.) New Zealand should be happy and grateful about the commitment of all these people to this country instead of threatening and punishing them all the way.


I do not understand either why – if someone lives with a partner – a younger partner should tell the story of their life in the application form if he/she still works fulltime and is known to IRD. Why is it not good enough if the applicant is only asked if he/she lives with a partner and if this partner already receives NZ Super or not? If the partner doesn’t receive NZ Super, he/she should not be relevant any longer. What I see all the time is that WINZ and MSD claim always and everywhere: “We are here to help.” Looking at all the forms, websites and sometimes also direct communication, I see distrust and threats."

And in the end, I can only come back to Jane Wrightson's initial question: "What is the point of a government pension?” In New Zealand it is having sleepless nights for so many until life is over.

(Last update: 07.09.2022)

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