Time to address NZ Super-immigrant policy
Opinion & Analysis
OPINION: MP Jacinda Ardern is correct: Parliament needs to inquire into the unlanced boil that is this country's policy of reducing NZ Super for immigrants by the amount they get in pensions built up while overseas with savings made from their own earnings.
Two weeks ago we reported that Ardern was drafting the terms of reference for a select committee inquiry into the issue, though it would require the Government to allow it to go ahead.
Anyone reading the internal 2004 Ministry of Social Development Review into the issue - a review that was never supposed to have been released - will see that an open inquiry is long overdue.
Labour is not alone in thinking this. United Future and NZ First both believe the policy is unfair.
The review said in blunt terms that the policy was unsustainable. It said that people generally lost their entire overseas pension and that there was a genuine “lack of cost-sharing”.
It wasn't the last review, and one gets the feeling it didn't impress ministers who didn't want to spend the money implementing fairer cost-sharing, but to me, the sheer number of reviews shows there is an issue of fairness that needs an airing in Parliament.
Under our policy, people can live in New Zealand for years and years and yet every cent of their pensions from overseas is taken to help pay for their NZ Super.
That's deeply resented by other countries, who believe that New Zealand is not genuinely sharing the cost of paying for its own residents' retirements.
To their eyes, New Zealand was taking all the taxes and economic benefit from immigrants' working lives and then using pensions built up in their time overseas to reduce the costs for New Zealand using the opaquely worded section 70 of the Social Security Act.
In some cases that can result in people who have lived and worked here for 20 years not getting a bean in NZ Super, so New Zealand pays no contribution to their retirement.
So unimpressed are some countries they simply refuse to pay state pensions here. The 2004 report notes that around $21 million of such payments were not coming from countries like Germany, Switzerland and the US because “our current policy settings mean these countries will not negotiate a social security agreement with us”.
The 2004 report notes that the current policy, which impacts more Kiwi Brits than any other group of immigrants, saved the Government $178m a year. That sum seems to have grown to $240m.
It's big money, particularly for a government keen on getting the country back into surplus. If there is a case of injustice here, it is one that could cost a lot to fix.
The pensioners claim their savings are being raided, and that in some cases it is forcing them into penury.
They consistently claim that they were told they would earn their NZ Super entitlement in full when they were considering coming here.
It was only when they retired, that they found the pensions they had built up from contributions from their earnings were taken to part or fully fund their NZ Super.
They feel they were decieved.
Worse still, for those who have Kiwi spouses, any surplus is taken to reduce the NZ Super of their spouse.
They feel that even though they were required to save a portion of their salaries into the schemes that built the pensions, they are pensions built up with their own money, and that they are being unfairly raided.
They feel it is like having a KiwiSaver nest egg used to reduce a person's NZ Super.
Just how much it might cost to "address" the issue is a tough one to estimate.
There have been internally mooted suggestions with a range of price tags which would allow those receiving overseas pensions the right to keep some portion of it giving them some benefit from their past salary sacrifices.
We do not know how much extra would flow in from countries currently not willing to make payments here while each dollar is deducted from NZ Super rather than a fairer proportion. An open inquiry could provide some of this information.
Will it happen?
My gut feeling is Ardern will be rebuffed. It is expedient to ignore the issue, but as I say, there is no harm in giving people who helped build this country a fair hearing and reporting on it to the New Zealand people.
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