The direct deduction policy
There are mechanisms in place to deny any form of retirement income to large numbers of foreign nationals who have lived, worked and paid taxes in
Under sections 69 and 70 of the Social Security Act 1964, migrants and New Zealanders who have lived and worked overseas are required to declare any foreign government-administered pension investments. Foreign pensions are then directly deducted from the New Zealand Superannuation entitlement; that is to say, NZ Super payments are reduced by the amount of the overseas pension received.
Where the overseas income is greater than the standard amount of NZ Super, the pensioner receives nothing in the way of NZ Super regardless of his/her years of contributing to the New Zealand system.
If the pensioner agrees to pay over the overseas pension received, however - through the Special Banking Option, for example - NZ Super will be paid in full.
In spite of repeated claims by Cabinet Ministers that
Direct deduction takes money from elderly people.
The policy constitutes elder abuse, swelling the government’s coffers by over 200 million dollars a year.
Spanning several decades, the direct deduction policy has provided successive governments with billions of dollars in revenue. It is a bonanza that the state has shown it is not prepared to lose - at any cost. The confiscation of overseas pensions is a highly unethical means of obtaining revenue (with no basis in international law); nevertheless it represents a source of income that the
The government makes constant efforts to widen the net.
Governments over the years have continually sought ways to increase this revenue by extending the direct deduction policy. In 1985 the government extended it to include spouses and children. It means that any New Zealander who marries someone drawing from a pension fund administered by a foreign government forfeits his/her right to NZ Super if the amount of the partner’s overseas income exceeds the amount of NZ Super paid to married couples.
In 2004 the passing of the Civil Unions Bill extended the policy to same sex and de facto couples.
Further, through the international services of the Ministry of Social Development, targets have been set to locate alleged undeclared overseas pensions for confiscation.
In appropriating overseas pension funds, the
The Sunday Star Times exposed the degree of “legalized theft” in an article “Clobbered by Pension Grab” (August 7, 2005) featuring a British migrant couple who calculated that by the time they reach 85, the New Zealand government will have taken from them $300,000 in overseas pension funds. Generally speaking, NZ Super is not a gift from the government: the article makes the point that people in
The government is effectively “double dipping”.
The policy is unprincipled.
The 2003 report delivered in the course of the last government’s Review of Superannuation Portability left no doubt that
“By investigating the development of the two main policies (portability and direct deduction), three underlying principles have consistently been recommended by groups of officials: equity in treatment between those who go overseas and those who remain in New Zealand; genuine sharing of social security costs between the countries in which a person has been resident; and facilitation of migration flows. Due to subsequent policy amendments, these principles are not being supported by existing policy."