Dutch pensions in New Zealand

Dutch pensions began within the civil service.

The first official Dutch age-pension system was established in 1798 for “loyal” servants of the Dutch government.  This and many subsequent ad-hoc schemes for civil servants were combined in the Pension Act of The Netherlands 1922.

In general, all civil service pensions are based on contributions from wages or salaries.  Salary deductions (premiums) for ABP pension entitlement started in 1922 at 10% for age-pension plus (if applicable) a further 5.5% for spousal survivor’s pension. 

Civil service pensions are directly related to (indexed) salary and length of service; the intention is that they provide a pension of at least 70% of one’s last earned salary after 40 years of employment with the Dutch government.

Dutch social insurance began after World War I.

Dutch social insurance legislation originated in several Acts passed in 1919 under the Ruijs de Beerenbrouck Cabinet.  The first Minister of Employment, P.J.M. Aalberse, implemented laws such as the Labour Act (prohibiting child slavery and instituting 8-hour days and 45-hour weeks), the Emergency Unemployment Act (financial assistance to the unemployed) and the Invalids and Age-pensions Act (providing every employee with a guaranteed pension at age 65).

The current social insurance regime of The Netherlands (for retirees) is centred around the General Age Pension Act (AOW) of 1957.  Spousal survivors' pensions are governed by the General Survivors Act (ANW).

The General Age Pension is not income-tested.

The AOW offers every resident of The Netherlands a guaranteed pension at age 65 and is based on a 50-year period of (compulsory) insurance between the ages of 15 and 65.  Every year of insurance results in the award of 2% of the relevant statutory base-rate (married or single).  Every full year of absence outside The Netherlands results in a discount of 2% per year.  Voluntary insurance when residing abroad is possible but limited.

Since its inception, AOW has been considered a base (first-tier) pension which can be complemented by (second-tier) occupational or civil service pensions as well as (third-tier) capital annuity and/or lump-sum/life insurance policies.

An important aspect of the Dutch pension system is that the AOW-pension itself is not income- or means-tested: having other second- and third-tier pensions and annuities (complementary pensions) does not affect the base-entitlement to the AOW-pension.  Similarly, second-tier occupational or civil service pensions are not affected by one’s third-tier investment-type policies.  The pension policy of The Netherlands is thus based on the overriding principle that income-testing or clawback of the AOW-entitlements discourages personal saving for retirement and thus will not be tolerated in any form.

Deduction of AOW shortchanges longterm New Zealand residents.

New Zealand’s direct deduction policy relies on the chief executive of the Ministry of Social Development to determine whether one’s pension is analogous to New Zealand Superannuation.  It is sometimes difficult to ascertain whether an overseas pension fits that category of pensions that are fully deductible.  More to the point, however, is whether the chief executive has taken care to establish whether a particular overseas pension should be treated as fully deductible.  It is apparent that the chief executive will target any and all overseas pensions in an attempt to reduce New Zealand’s NZ Super bill.

The chief executive contends that AOW-pension from The Netherlands is fully deductible from NZ Super whilst occupational and/or civil service pensions are not fully deductible.  This “opinion” has been challenged on several occasions but no individual pensioner has yet been successful in persuading the current or any previous chief executive that the deduction of AOW-pension is unfair to longterm residents of New Zealand.

Civil servants suffer a double deduction.

Under Dutch anti-accumulation law, the (first-tier) AOW-entitlement must be taken into account when calculating the (second-tier) civil service pensions.  The general principle behind this calculation is that the Dutch government has paid the AOW-premiums for its civil servants and is therefore entitled to discount the civil service pension to ex-employees.

New Zealand residents with Dutch pensions have long struggled to come to terms with the chief executive’s failure to take into account that AOW-pension is deducted from civil service pensions paid by The Netherlands.  They point out that any AOW-pension based on entitlement accrued during a person’s civil service career is deducted in both New Zealand and The Netherlands - resulting in a “double deduction”.  Rather than take pains to ensure that fairness prevails, Ministry of Social Development officials have done all they can to ensure the anomaly is not resolved.

In 1999 the double deduction matter was heard in the High Court of New Zealand (Ruifrok and van Lindt vs Chief Executive), which ruled:

“The Court is confined to applying the domestic law as set out in the legislation.  If anomalies are thought to arise, then that is a matter for the respective Governments and article 27 of the Reciprocal Agreement permits review of the Agreement, after receipt of advice on the operation and effectiveness of it.”

In June 2000, Social Development Minister Steve Maharey signed a revised Agreement on Social Security between New Zealand and The Netherlands.  Although the revision referred to company pensions, write-offs and reimbursements to pensioners affected by the double deduction, its Article 19.2 was drafted in such a way that only one person has ever been reimbursed.  The inequity is acknowledged in the 2005 Report delivered in the course of the previous New Zealand government’s Review of New Zealand Superannuation, yet after more than a decade of waiting for a resolution to the double deduction issue, pensioners still have no tangible results. 

The New Zealand government pays only a fraction of Dutch immigrants’ social security costs.

The Social Security Agreement the Dutch and New Zealand governments signed in 1990 on the flawed basis of so-called "cost-sharing" turns out to have excessively subsidized the New Zealand government’s superannuation costs.  Very often, as a result of the Agreement - operating in combination with section 70 - New Zealand does not fairly reward its Dutch immigrant taxpayers for their contributions.  Because section 70 caps their total pension income, their high-value AOW-pensions result in disproportionately low NZ Super payments. 

(For example, a New Zealand resident who has worked 25 years in The Netherlands and 25 in New Zealand faces a NZ Super-level maximum retirement income.  The Dutch pension, however, is likely to constitute at least 80% of that income; New Zealand’s contribution is the less-than-20% balance.)

Compounding immigrants’ grievances is the fact that overseas pensions worth more than the half-married rate of NZ Super can be deducted from a spouse’s NZ Super payments, even if that spouse has never resided overseas.

The Dutch government failed to protect AOW-entitlements of people living in New Zealand.  The advantage (“batig saldo”) accruing to the New Zealand government as a result of the Agreement leaves the Dutch government unmoved: it is the individual pensioners and beneficiaries, having emigrated to what they thought was the safest country in the world, who experience their pensions being abused.

Whereas many other countries refuse to agree to New Zealand's deduction and income-capping policy, the Dutch government agreed to it; the officials who organised it have been misrepresenting the policy to the Dutch Parliament ever since by portraying NZ Super as a fully means-tested welfare benefit and affirming that it is just and proper to ensure that no one person is advantaged over another.

Under European Law (EU treaty 1408/71), such cost-sharing agreements are forbidden; retirement incomes are not capped, and where people have worked in more than one member state, each country has to pay its proportional (residence- or contributions-based) share.

The government refuses to make its policy just.

New Zealand officials know such rules exist but are not prepared to adopt them since that would result in many immigrants having more than a capped NZ Super-level income.  The official viewpoint does not appear to become any more enlightened with the passage of time.  As late as October 2007, Acting Minister for Social Development and Employment Steve Maharey twice included in his review Overview paper his opinion that:

“People with an overseas pension entitlement would be financially advantaged in comparison with people who lived all their life in New Zealand.  (European-type social security principles) would therefore represent a significant change to the longstanding principle that all New Zealanders should receive an equitable level of state benefit in retirement.”

NZ Pension Abuse can only suppose the animosity towards migrants being "advantaged" arises from jealousy and greed.  Many pensioners (not only Dutch) justifiably consider the retirement income limitation resulting from such attitudes a form of elder abuse. 

In March 2006, the entire Dutch migrant community erupted with anger after Social Development Minister David Benson-Pope indicated he was dipping further into Dutch pockets.  The Dutch government had approved a cash payout of a tax rebate for low income earners - including Dutch migrants in New Zealand receiving the AOW-pension.  Mr Benson-Pope informed Dutch pensioners that, following communications with the Sociale Verzekeringsbank, the tax rebate could be considered a cost-of-living increase and consequently subject to section 70.

An unapologetic Mr Benson-Pope told immigrants from The Netherlands that the tax rebate granted to them by the Dutch government would not therefore be for their benefit - but entirely for the benefit of the New Zealand government.

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