Diane Maxwell calls for crack down on people who get Super without earning it; Urges Govt to raise the age of eligibility to 67 and resume contributions to the Super Fund

Diane Maxwell calls for crack down on people who get Super without earning it; Urges Govt to raise the age of eligibility to 67 and resume contributions to the Super Fund

The Retirement Commissioner is talking tough on people who come to New Zealand to retire.

Diane Maxwell is calling for the Government to increase the length of time you need to have lived in NZ as a resident to receive NZ Superannuation, from 10 to 25 years.

“We’re an incredibly diverse country. That’s fantastic… However, we need to be able to afford it,” she told interest.co.nz in a Double Shot Interview.

“The length of residence needs to be appropriate in the context of increasing international mobility and reform of overseas pensions.”

Maxwell proposes years be counted cumulatively from age 20, and continue beyond the age of eligibility for Super, so someone may qualify when they’re aged 70 for example.

She says 25 years’ residence represents just over half of one’s working life and would still allow people to have lived overseas for extended periods of time.

New Zealand, along with Australia, has the lowest residence requirement in the OECD, where the average threshold is 26 years.

Asked whether 25 years is long enough in light of New Zealand receiving a record net 70,000 immigrants (including returning New Zealanders) a year, Maxwell says: “Maybe in the future there’ll be a time for that.”

The new rule would only apply to new immigrants, so the transition would take 15 years to be fully implemented.

Maxwell’s suggestion is part of the second and final set of recommendations the Commission for Financial Capability’s (CFFC) has made in its three-yearly review of retirement income policies. The first set was presented to the Government last week and called for the minimum KiwiSaver contribution rate to be increased among other things.

Jobs support to accompany age of eligibility increase

The CFFC is also calling for the age of eligibility for Super to be increased from 65 to 67.

Maxwell suggests there be a 10-year notice period until 2027, after which the eligibility age increases by three months every year, to reach 67 by 2034.

With 24% of those over 65 currently in paid employment, the CFFC says the increase reflects the fact people are living longer.

Internationally, 67 is also the new norm.

Maxwell says a number of people have been telling her, ‘I want to work, I want to be useful, I’ve got a lot of give… but I need a bit of upskilling, I need some retraining. I can’t pay for that. Help me.’

For others, she acknowledges retiring at 65 is too late.

Therefore she believes the money saved by increasing the age of eligibility should be invested in people in their 50s and 60s, through targeted employment and re-training programmes for example.

These could help a manual labourer move into less physically demanding managerial or teaching roles for example.

Prime Minsiter Bill English has been non-commital when asked about raising the age of eligibility. Labour and NZ First oppose the idea, while ACT supports it.

Age rise will see Super costs drop 10% in 2034

Treasury estimates increasing the age of eligibility to 67 would reduce Super costs by $3.5 billion or 10% in 2034. The savings are expected to continuing growing each year thereafter.

Taxpayers currently spend $11 billion (net) on Super a year, which equates to 5% of GDP. This cost is expected to more than triple to $36 billion in 20 years’ time, and hit 7% of GDP by 2045.

Asked whether the situation is really that bad, given other countries in the OECD already spend 7% of GDP on their pension schemes, Maxwell says: “Rather than look at cost of GDP, look at the actual cost of Super.”

“The single biggest increase in cost to the Government last year was NZ Super. It went up by $700 million, followed by health, which went up by $600 million. If you combine health with Super costs, you really have got some significant increases.

“We know these costs are going to grow because they’re fixed costs.”

Maxwell acknowledges Treasury forecasts Super, in its current form, will be a key contributor to net debt blowing out from 25% to 206% of GDP by 2060.

Yet she warns any projections relative to GDP rely on a number of assumptions around growth and productivity, which is expected to drop as our population ages.  

Migrants and working age people shouldn’t receive Super through their partners

In addition to reforming Super with our aging and increasingly international population, the CFFC would like it to be modernised socially.  

It’s calling for the non-qualifying partners (NQP) rate to be removed. This would mean a super annuitant with a spouse, who doesn't qualify for Super, would no longer be able to receive a higher ‘couples’ rate.

There are currently nearly 13,000 non-qualifying partners included in their partners’ Super, costing taxpayers $200 million a year.

The majority of NQPs are within five years of the age of eligibility. There are also 846 who don’t qualify because they haven’t lived in NZ as residents for 10 years.

“Eligibility for NZ Super should be based on an individual meeting the eligibility criteria and this option does not meet that principle. New Zealand is the only remaining country in the world that has a non-qualifying partners pension rate,” the CFFC says.

It would like the NQP rate phased out over five years.

“It will affect people,” Maxwell admits.

“But it’s a very old-fashioned view. It’s based on the idea that we’re all living in tidy couples and that we retire together as couples, and it’s sort of based on the assumption that a wife is not working and therefore she needs to get super when her husband does…

“Things have changed so much. [Do] we think someone in their 40s should be getting Super because their partner is a super annuitant - I don’t think so.”

Clarity needed around what happens if you get Super but have an overseas pension

The CFFC wants the direct deductions policy for overseas state pensions to be reformed.

“Increasingly, countries are transferring responsibility for pensions from the state towards individuals, with a range of private savings schemes supplementing state safety net pensions,” it says.

“It is becoming more difficult to clearly define what overseas pensions are comparable to New Zealand Superannuation and should qualify to be deducted.”

Specifically, Maxwell says: “We’ve got to ensure we’re not offsetting ones where people have voluntarily contributed.”

With 11.8% of Super recipients receiving an overseas pension, the issue needs to be addressed. The number of people in this category has increased by 30,000 since 2010 to 83,982.

Crown Super Fund contributions should resume

Finally, the CFFC is urging the Government to resume its contributions to the NZ Super Fund, having suspended them in 2009.

The Fund is expected to be drawn on to help pay for Super from around 2032/33. It’s expected to contribute towards paying for 4.5% of Super costs in 2040.

The Fund anticipates Government contributions will resume in 2020/21.

“The idea was that they would contribute when net debt got down to 20% of GDP. It’s not there yet. Do we have to wait for that?” Maxwell questions.

“The thing is growing, but we need it to grow faster.”

Maxwell would be happy if contributions resumed at the rate of 1-2% of GDP.

She believes we can afford it, as there have been some “aggressive projections” around what our budget surplus might look like in the mid-term.

While Crown contributions are suspended, the CFFC says the Fund shouldn’t be taxed. It’s paid $6.6 billion of tax since 2009.

“The effect is a net outflow from superannuation investment for the future to other purposes today,” it says.

Interest.co.nz has done a series of stories and video interviews with Maxwell, as the CFFC has worked through its review. You can see these here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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If you are a migrant, and you are 65, and you can't get super or a job, will you just turn to crime??


Maybe, but then you might (should) get a free ride to the departure lounge at Auckland International... also courtesy of the taxpayer.

Quite agree, but if a NZ citizen it's hard to boot me out.
(I might be poor, I might not.And I want to keep on making tax free capital gain on my 15 houses?from my $2000 per day hospital bed?)

You would get the dole and be expected to find work or lose it. The problem you have identified being people too lazy to work and who would rather steal is not an age issue and could be applied to someone who is 21. It is effectively blackmail, pay me some money to sit on my behind or I will steal from you.

I am willing to pay more in tax to put people like that in prison (preferably a well-run low cost prison (I can live in a hypothetical dream land if you are)).

English gonna bite ?

English gonna bite his lip

lip service definitely.

No, he will apply Key's position (no increase in age) to keep the oldies on board while dangling the possibility to younger voters by pointing out he has made no commitment to no entitlement age increase, thereby removing a criticism made against Key.

Savvy. He will blow National's chances at the next election if he scorns the grey vote and they flock to Winnie. Best we could hope for is that a 100,000 or so oldies agree to march into Pike River mine with Winnie, hopefully with a few pipe smokers in tow.

Pike river will go well until Winstone lights a fag.

Must admit that was about the first thing that crossed my mind as well :D

Best chance for what, exactly?

Save money on our super bill.

Man this country has turned nasty

If interest rates are going to rise globally, maybe that will depress the sharemarket and it might make sense to pay off debt in the short to medium term rather than borrow more to invest in the sharemarket??

the cat's out of the bag now that key's gone!


Why should we pay migrants super unless they have been here a long time and paid sufficient tax first.

Social Justice. We probably should pay anyone who applies, from anywhere in the world ...to be fair.

Yes, why not, after all we "happily" pay accommodation top ups to foreign landlords.

I don't have any problem with increasing the length of residency required, although it probably won't actually save all that much money.

However, attempting to link entitlement to super to the amount of tax you've paid is a dangerous road to start down.

we are headed that way now, next step will be compulsory kiwisaver and once running for a couple of decades the rolling back of government super

People need to make sure upcoming generations are well and truly aware of what we had, so they know what it is they should be fighting for.

Yes, 2 replies to the same comment, in the case of your future, I feel for the women of it. But by then, we may be facing a UBI so maybe all this discussion is a waste of time.

That might be the way we are headed, but I personally would oppose it. It would require a great deal more administration and bureaucracy than is necessary now, increase inequality and old age poverty and might well not actually save all that much

what if those migrant have been short time here but contributed more than non migrants?
Do we measure in number of years? taxes paid? both?

We want momma back..

All sounds reasonable. We should also subtract any amount that people have claimed from 'working for families' over their lifetime.

That should come off any employer's pension fund for that is who that sort of welfare really benefits.

Do you understand why we have working for families ? Im picking you don't reside in Otara.

Winston suggested 25 years at least 10 years ago, so it is not new.
Indeed why not start at age 67 for all who do not meet the 25 year threshold and ignore the complaints

Changing the residence requirement could be done immediately, no need to phase it in. Rules change all the time, just tough luck for anyone affected.

Agree with Diane Maxwell when she says contributions should resume to the NZ Super Fund. The fund has performed better than many KiwiSaver funds and is critical to helping fund our future retirement(s).

Generally western nations already contribute to the cost NZSuper requiring a credit for years worked before arriving here. China and India have nothing to offer so theirs take the full 100% while holding on to the cash that they saved before they came here. It has to change.

Muntijaqi is correct.
Many people in NZ haven't worked very often and therefore have lived off our very generous welfare system.
Why should they continue to be supported by tax payers, for for all of their life?
Yes I pay plenty of tax!!!

Will there be a claw back too ?

Great interview.
The Commissioner has very sound views which gives one confidence for a sustainable long term future for universal superannuation.
However it is politicians who make the decisions, and unfortunately they are driven by short term populist views to either maintain or obtain power and this is not necessarily in the best interest of looking for long term solutions.
Both John Key's and Andrew Little's commitments to retaining the status quo were/are quite clearly about appealing for votes.

There can be absolutely no reason not to impose the 25 year qualifying to all who are already here provided there also existed a means tested benefit of lesser value with tight rules to fill the gap
We do not want 10 year qualifiers who have $5m invested here or elsewhere.

We have really got this whole super -for-migrants issue, arse -about -face , haven't we ?

My understanding is that you can bring your old folks here on condition that you can afford to sustain them and meet their medical expenses .

Why has this not been enforced ?

Not only that but the oldies get abandoned and end up grabbing pensioner accommodation originally built for locals after a lifetime of living here.

Quite simply , the rules need to change

From say 2017 , you should be a taxpaying contributor for 10 years before qualifying AND then if you are already 55 years old or older , you cannot migrate here without a means test AND you must invest $900,000 in NZ Government stock for 10 years to meet your medical and retirement costs when you get to 65 .

If you cant meet the criteria , dont come here , you can just stay in Johannesburg, Jakarta, Mumbai , Shanghai Bangkok, Beijing , Myanmar or Manilla .

Simple as that

10 years wait then FREE$$$ great deal
Wish I could get it here
Wake Up NZ the rest of the world thinks SOFT TOUCH NZ

it cant be more than 25 years as the commissioner would be unlikely to qualify,is that a conflict of interest?

Many do already but mostly they just sit around for the NZ govt to hand them FREE$$$ after waiting only 10 years looking after their grand kids
The FREE$$$ healthcare is wonderful too. Many just turn up at North Shores A&E
Why pay for a GP.
Honestly there has been so much wrong with the way NZ's government has run things its frightening
Must be so because Johnny bowed out before his record 4th term which he knows he would've won against such poor opposition.
God really will have to save NZ
Once interest rates rise & oil too it'll be crash as usual

The Retirement commissioner has some very sound and reasonable points BUT then we get further into the detail and it turns into another social welfare benefit.
Superannuation is for your retirement. Contributions are made and you reap the reward when you retire.
If you wish to continue to work after reaching retirement age that is your decision. BUT you will be taxed on total income received in the financial year. Private pension funds are what is needed what you put in is what you get back in your retirement years. This discussion will still be going on in twenty five years the politicians do not want to give up controlling individuals lives

(wearily) no, no, no. You are not contributing to your NZ Superannuation.

You may or may not be contributing towards your KiwiSaver, that is your choice, and when you reach the age of 65 you can do what you like with that money.

You may or may not be saving for your retirement in other ways, that is your choice as well, and you can do what you like with that money as well.

But NZ Super is not paid for from recipients' earlier contributions. It is paid from tax receipts. You get it when you reach the age of 65 (provided you meet the residency requirements) regardless of how much tax you have contributed, whether you are earning or not, how much private savings you have. And you can do what you like with that money.

Now how exactly does any of this give politicians control over people's lives?

At some stage NZers need to wake up that not all migrants are there to GIVE BACK to their host country NZ
They are there to extract as much out of the slack NZ welfare system as they can
Mt Roskill has an entire group that know the system better than WINZ
Go ask WINZ its true

I'm already struggling to work at my job now 6 days a week, it is aging me and effecting every aspect of my life! Not to mention all the injuries!! I am only in my 40's. But if the retirement commissioner and the national government think it is a great idea for me to work longer then they really need to go!! I am praying for Labour to win I hope they get rid of this woman first!!! If I want to retire at 65 and draw out my KiwiSaver (which clearly says I am entitled to at 65) then I damn well will!!!

You can retire whenever you like. What you cannot do is expect other people to pay for you to retire whenever you like.

Super costs about $30m/day and goes up by about $2m/day. Numbers I can understand.

It would be interesting to know what the numbers would be if the age was 67 right now .... not that I am suggesting it should be. Ditto for the immigrant stuff. Would these measures save lots and lots or just rats and mice? If we don't have a handle on the numbers then this whole discussion is just people blowing smoke.

Some folk think you "earn" it by paying taxes all your life. There are so many exceptions - not just long-term beneficiaries either.

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