Make immigrants wait for NZ Super

New Zealand has a reputation for being friendly to immigrants, but the Retirement Commissioner thinks it’s being just a little too friendly when it comes to NZ Super.

Commissioner Diane Maxwell has copped abuse for proposals released on Wednesday to cut state pension entitlements, including lifting the age of entitlement to NZ Super to 67 by 2034.

But there’s one suggestion she’s not been criticised for: increasing the time immigrants must be resident before getting NZ Super from 10 years to 25 years.

What wasn’t immediately clear was that Maxwell meant her policy to also cover New Zealanders living overseas.

Maxwell, who has a statutory duty to advise Parliament every three years on retirement income policy, thinks qualifying for NZ Super should require 25 years as an ‘‘ordinary resident’’ in New Zealand after the age of 20, though anyone who fell on hard times before that could receive emergency benefits.

Work would need to be done on an implementation plan, Maxwell’s office says, but the proposal, if MPs passed it into law, would likely apply immediately to new migrants to New Zealand, but be phased in for New Zealanders currently resident here, who may opt to head overseas to work, and those already living overseas.

The current 10-year eligibility rule dates back to 1972 when most migrants were British, and their UK state pensions could be deducted from NZ Super, with taxpayers here and in their old homeland sharing the costs of funding their super.

These days many migrants come from countries such as China where there is no state pension to help pay for NZ Super, which pays a married couple, who both qualify, $34,916.96 a year before tax.

NZ First welcomed Maxwell’s proposal, while decrying her suggestion to lift the age of eligibility to 67.

The party anticipated her migrant call by tabling a private member’s bill in October calling for the shift from 10 to 25 years.

In his bill, NZ First MP Denis O’Rourke says: ‘‘Globally, 10 years is an unusually short time for full entitlement to a universal, nonmeans tested pension at age 65. Considering average life expectancy, New Zealand Superannuation is paid for 20 years, which is up to $460,000 per person at current rates.’’

But Maxwell’s recommendations fall short of NZ First’s when it comes to New Zealanders returning from Australia to retire.

There are an estimated 600,000 New Zealanders in Australia, where the retirement age will begin rising to age 70 in a series of steps starting next year.

Australia’s compulsory super savings regime means they are amassing far larger nest-eggs than people living here are using KiwiSaver.

Yet under current policy settings they can return to New Zealand at age 65 to retire, immediately qualify for NZ Super, and and not have to contribute anything from their super nest-eggs.

That’s because New Zealand’s social security treaty with Australia says years spent as an ordinary resident in Australia count as years spent in New Zealand for the purposes of NZ Super qualification.

O’Rourke says his bill would mean Kiwis overseas would qualify for NZ Super only when they had been resident here for 25 years over the age of 20, so those returning would initially have to live off their savings.

New Zealand faces a surge in pension costs if the change isn’t made.

‘‘It’s not just Australia,’’ O’Rourke says. ‘‘It’s other countries like the UK and Australia raising their retirement age. People will come back to New Zealand to get NZ Super at age 65. We need to pay attention to this.’’