The $2.5bn pensions bill
NZ Super is being docked for people who have worked overseas, reports Charles Anderson.
When Malcolm Larsen married his Norwegian wife Sigrid Stemsrud more than 30 years ago, there was little thought about retirement. Larsen, now 82, had worked for the New Zealand Government all his life and assumed that when he reached 65 he would be able to claim his superannuation, along with every other eligible citizen. For a time he did. And so did Stemsrud.
But when Stemsrud reached the Norwegian retirement age of 67, her New Zealand superannuation was completely stopped and Larsen’s was severely docked. They became caught up in section 70 of the 1938 Social Security Act, which offsets New Zealand’s pension scheme with the earnings from an overseas pension.
‘‘From that point section 70 kicked in and caused all sorts of problems,’’ Larsen says.
The problem is that the Norwegian pension system, while government administered, is not government funded. Stemsrud paid into it while working there.
As a result of the law and varying exchange rates, Larsen’s situation has shifted from losing all of his New Zealand pension, to losing about half of it.
However, due to what some are calling unfair anomalies in the law, if both of them moved back to Norway then they would both have their New Zealand pensions reinstated in full, along with receiving Stemsrud’s Norwegian pension.
Retirees have been battling the legislation for years.
Bob Newcombe came from England to New Zealand in 1970 where he continued to work. But he sees almost $300 a week of his and his wife’s New Zealand superannuation go back to the Government, because he gets a British pension which he paid into when he lived there.
He says it would be fair if the British pension was solely government provided.
‘‘But if you paid for it out of your earnings that’s your money. The New Zealand Government doesn’t distinguish between different types of pensions.’’
Figures released under the Official Information Act showed that last year more than 85,000 people were affected by the legislation to a tune of almost $350 million. This has grown from 50,000 people and $207 million since 2007. A total of almost $2.5 billion dollars has gone back to the Government since 2007.
‘‘This is not fraud on a minor scale this is major theft,’’ Newcombe says.
The Retirement Commissioner Diane Maxwell is more careful with her words, but agrees with the principle.
‘‘Your pension is your pension. You may have lived and worked in New Zealand all your life, but we don’t think you should lose your pension because your partner gets a pension from a different source.’’
A Commission for Financial Capability review released late last year and presented to the Government, recommends immediately removing the spousal deductions clause of the law.
However, Social Development Minister Anne Tolley has said the issue was still about making sure New Zealanders who have spent their lives working and paying taxes here, weren’t disadvantaged compared to people who have spent time overseas, or immigrants to New Zealand who are entitled to overseas state pensions.
Maxwell says part of the problem is the word ‘‘state pension’’.
‘‘What we are seeing now is that overseas pensions are closer to Kiwisaver than to Super.’’ ‘‘We owe them better process.’’ New Zealand First MP Denis O’Rourke has tabled a member’s bill seeking to abolish section 70. But the policy would raise minimum residency before receiving the pension from 10 to 25 years.
If you paid for it out of your earnings, that's your money. Bob Newcombe