Pensions: ‘Daylight robbery’

Migrants say the scale of overseas pensions deductions is ruining retirements. Rob Stock reports.

‘Over-65s who worked in Britain, Australia, the Netherlands and Canada are bearing the brunt of the policy.

NEW Zealand is deducting about $450 million a year from the overseas pensions of people receiving NZ Super payments, information from the Ministry of Social Development shows.

That is up from $325m in 2016, and over-65s who worked in Britain, Australia, the Netherlands and Canada are bearing the brunt of a policy dubbed ‘‘daylight robbery’’ by pensions campaigner Sissi SteinAbel, who immigrated to New Zealand from Germany.

Pensions Minister Carmel Sepuloni called the deductions ‘‘fair, equitable, and affordable’’, but Stein-Abel said the money being deducted came mainly from ‘‘contributory’’ pensions – schemes workers paid into from their salaries.

Stein-Abel said the ministry’s figures understated the cost to over-65s who had worked for some portion of their lives overseas, as the numbers did not include those who did not apply for the state pension because the overseas one was higher.

The Government said that without the deductions, people who had worked overseas would get ‘‘a greater overall level of government retirement support’’ than people who had only lived and worked in New Zealand.

But Stein-Abel said that was misleading because overseas pensions built up from salary contributions were not government retirement support.

‘‘Individuals and their employers fund them during overseas employment, and these people are not ‘financially advantaged’ compared to Kiwis who have never worked overseas,’’ Stein-Abel said.

‘‘These Kiwis who have never left the country could save the money others had to pay into the retirement schemes overseas, and invest it into property, shares and, since 2007, KiwiSaver,’’ she said.

New Zealand’s universal basic old age pension is unusual – most countries require workers to pay a portion of their salaries into contributory statemandated pensions schemes.

But under the Social Security Act, the Ministry of Social Development may decide a foreign pension can be deducted if the scheme is administered by or on behalf of another country’s government.

Superannuation applicants often have no idea their overseas pensions would be deducted, said Paul Rea, whose overseas pension was deducted even though he worked in New Zealand for more than 30 years.

Rea called for a ‘‘long stop’’ to exempt people who had been in New Zealand for 20 years. This would would mirror ‘‘fair’’ pension reforms before Parliament which would require migrants to wait 20 years to qualify for NZ Super instead of the current 10.

Stein-Abel said her preference was for a law change, so people received a proportion of NZ Super for every year they lived in New Zealand during their working lives, earning the full NZ Super over 20, or 25 years.

‘‘I will not receive a cent of NZ Super, once my overseas pension payments kick in. Living and working in New Zealand for 20 years when I retire will remain totally unrewarded,’’ she said.

The impact of deductions can fall unfairly on some NZ Super recipients, as migrants from some countries, China included, are allowed to keep their full overseas state pensions.

Stein-Abel said the pensions deductions were a ‘‘dirty secret’’ and challenged the ministry to publish online a full list of pensions that were deducted so anyone considering moving to New Zealand could factor it into their financial planning.

The ministry released a complete list of overseas pensions to the Sunday StarTimes under the Official Information Act.

For some countries with powerful pension schemes, and long economic and immigration links to New Zealand, the amounts deducted are substantial.

This includes the $255m of British pensions deducted from 60,894 people. By comparison the figure for Sudan was $690.