NZ Super double dipping unfairness

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Retirement Policy and Research Centre recommends mininum 25 year residency requirement to qualify for NZ Super. Your thoughts?

25th May 12, 5:17pm by Amanda Morrall

By Amanda Morrall

Retirement researchers at Auckland University are recommending Government revise the residency requirement for New Zealand Superannuation (NZS) from 10 years to 25 years to help resolve identified "injustices" affecting foreign pensions.

The proposal, contained in a report by the Retirement Policy and Research Centre (RPRC), says the adjustment would be one of the quickest and most efficient ways to address "anomalies and inequities" affecting an increasing number of New Zealand residents with overseas pensions.

Researcher Claire Dale said while it was clear that no person should get two full basic state pensions, New Zealand's "current policy works unfairly for many of the 50,000 plus people affected.''

As an example, Canadian employment-based pensions are now deducted from NZS by virtue of the direct deduction policy (DDP) "because they are run by the state."

Dale and co-author Susan St. John said Government's continued neglect of the issue, in the face of growing challenges related to the sustainability of New Zealand Superannuation and also potential Human Rights conflicts, would only serve to complicate matters down the road. Both the Ministry of Social Development and Retirement Commission have raised the issue but to no avail.

The aim of the DDP is to prevent residents who spent time working abroad, but who live in New Zealand, from "double dipping" - earning pensions in both countries.

Migrants have denounced the DDP as unfair because in some instances they paid into pensions through earnings deducted from their pay. In some cases, the policy even punishes the New Zealand born and domiciled spouses of migrants if the amount their partner's earn from a foreign pensions is above the NZS entitlements.

While this and other pension anomalies identified by the RPRC affect around 50,000 New Zealand residents currently, the number of those affected is expected to grow because of migrant flows. (See table below).

The report's authors argue that the simplest way to resolve the pension problem is to change the qualifying period of residency, now at 10 years, to 25, "rather than tinker with administrative rules in a complex reform to apportion NZS.''

The 10(5) rule requires qualifying NZS candidates to have lived five of the 10 years in New Zealand after the age of 50.

Dale said the requirement was among the most lenient in the world because those that met the residency requirement need not have even paid tax here to receive the NZS.

"If the NZS required at least 25 years' residence between the ages of 20 and 65, it may then be far less important to identify the kinds of overseas pensions that are brought into New Zealand,'' the report states.

The report notes that 85% of the 51,618 NZS recipients affected by the DDP have lived in New Zealand for more than 30 years.

Another problem identified by the RPRC is the inequitable nature of pension policy with Australia.

As it stands, Australians with large savings from the Australian compulsory superannuation scheme can come to New Zealand and qualify for the full NZS, whereas if they retired in Australia, the means-test could disqualify them from receiving the Australian Age Pension.

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4 Comments

by Wolly | 26th May 12, 12:45pm 1337993117

This is the sort of garbage we should expect from fools. 25 years right....so we receive an immigrant this year from a piigs failure...they bring capital with them and invest in a new enterprise that within ten years is employing 100 'Kiwi'...generating oodles of govt revenue and export income....so listen immigrant swine "you aint going to get no pension cos you aint been here for 25 years....ahead of you are the thousands of Kiwi who have never made an effort in their useless lives to produce a dam thing.

"Retirement researchers at Auckland University".....wow just look at the contribution to NZ they are making...stupendous....not.

by Basel Brush III | 26th May 12, 3:06pm 1338001597

Wolly,

Would you care to venture a number of those affected by your supposed situation?

Seems to me that non-qualifier won't need our pension anyway. Also we need he/she to help pay for their own aged health care as well.

by jh | 26th May 12, 5:08pm 1338008884

Period of Residence

Generally you must also have spent time living in New Zealand to qualify for a benefit or pension.

The minimum period of residence required varies for particular benefits and pensions. For example, if you apply for New Zealand Superannuation the minimum time you must have spent resident and present in New Zealand to qualify is ten years, five of which when you are aged 50 years or over.

Generally, if you leave New Zealand for more than 26 weeks you may not be considered ordinarily resident in New Zealand. If you spend more time outside of New Zealand than inside you are also not considered to be ordinarily resident in New Zealand.

http://www.workandincome.govt.nz/individuals/travelling-or-migrating/residency-requirements-for-new-zealand-benefits-and-pensions.html

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So the olds only have to be here 10 years (5 over 50) and provided they are here 6 months of the year (over Summser) they can live cheap as hell in China and still draw National Super. Helping the family business (unpaid) would help too?

by David B | 26th May 12, 6:15pm 1338012921

The residency rules for National Super should be massively tightened up. The current residency requirements I don't think have changed since the scheme was first introduced back in the mid 70's. New Zealand is a very different place to then, and the Act needs to be updated to reflect that.

I don't have a problem with 25 years.

As for the deducting overseas pensions from National Super, this is a long standing practice. It’s nothing new. In the past it mainly affected former UK residents who had paid National Insurance while living in the UK and were now receiving an old age pension by virtue of their contributions, but were living in NZ. Former residents of the UK, by virtue of the reciprocal social welfare agreement that exists between our two countries, are allowed to count residency in the UK as residency in New Zealand for establishing welfare entitlement, including entitlement to National Superannuation.

Deducting the UK old age pension (which gets paid direct to the NZ govt. by the UK govt) achieves two aims. One, it smoothes out alterations in the amount received due to currency fluctuations (and risks) and currency fees, thereby facilitating a regular and known weekly income and two, it does not advantage former UK residents over NZers, in that they (the British) qualify for and collect National Super in NZ by virtue of their UK residency, but now get National Superannuation in addition to their Uk pension. That is they get more than New Zealanders. It keeps everybody on the same rate. That is fair and proper as far as I am concerned. But we are now getting retired people from many more countries other than just the UK, so it is time the rules were revisited to reflect a more complex situation.

It’s time for the whole thing to be tightened up. In particular we must stop fair-weather Kiwis who have left NZ and lived many years overseas, paid no income tax here then coming back to the country to retire and expecting to bludge off the NZ taxpayer for their super. This is not on. It is in these sorts of areas that the cost of National Super can and should be modified, rather than a wholesale moral/fiscial panic and unnecessarily raising the age of eligibility.