Double dipping

The former New Zealand government insinuated that those persons who want to retain their overseas pensions and claim NZ Super are guilty of double dipping.

Former Finance Minister Michael Cullen wrote to a pensioner in September 2005:

“It would be unfair if people who split their working lives over two countries got two state pensions.”

In applying its direct deduction policy, the New Zealand government makes no distinction between overseas pensions that are administered by another government and those that are actually government-funded.

In terms of policy fairness, the distinction is vital.  If a government-administered pension is not government-funded, the amount received depends on the amount of personal contribution and the pension therefore constitutes personal retirement savings.

But the last New Zealand government lumped state-administered and state-funded pensions together as state pensions when defending the direct deduction policy.  The government implied that its policy justifiably prevents retirees from receiving a second state-funded pension they would have received if the policy were not in place.

The government often declared that overseas pensions are state-funded.

The Finance Minister implied that all pensions captured by the policy are funded by overseas governments:

“It is a fundamental principle of NZ Super that all New Zealand residents should receive the same state-funded retirement income regardless of their personal income or circumstances.”

NZ Pension Abuse supports this principle.  However, most overseas pensions captured by the direct deduction policy are not state-funded but constitute personal income - income that Dr Cullen stated ought to be exempt from capture.

Obvious examples of double dipping are denied.

Pensioners objecting to both the loss of their pension rights and accusations of “double dipping” point to exemptions from the direct deduction policy that appear to make the government look hypocritical:

• Some British pensioners enjoy dual entitlement, receiving two state pensions - the UK National Insurance pension and NZ Super - without reduction

• Government occupational pensions include the Government Superannuation Fund, subsidized in part by appropriated overseas pensions.

The former Finance Minister denied these anomalies:

“Claiming that some New Zealand citizens are already exempt from the direct deduction policy (and) that many have two state pensions ... is not correct.”

The flaw in the government’s attack on “double dipping” is that NZ Super is not a gift from the government.

New Zealand residents pay for a pension in retirement through general taxation.  The 2005 Report (prepared as part of the previous government’s Review of New Zealand Superannuation) makes accusations of double dipping look foolish:

“People who have lived in New Zealand for a long period of time have made a significant contribution to the country and therefore ought to receive full NZ Super entitlement.”

No fewer than 85% of residents with overseas pensions have lived in New Zealand for 30 years or more.  The pensions they bring from up to 15 years working overseas comprise the bulk of their capped NZ Super limit; all that the New Zealand government supplies is a top-up - often a mere fraction of the full NZ Super entitlement their taxes had supported.  Many pensioners receive no NZ Super whatsoever.

The former government asserted that its top-up constituted cost-sharing.

In reality, the government is abusing a fundamental citizen contract with retirees who have worked abroad, returning on average no more than a few cents for every dollar of value received.

In capturing overseas pension funds, the New Zealand government is undeniably being paid twice for an individual's retirement income.

In truth, it is the New Zealand government which is double dipping.

Moreover, overseas pensions, subject to the Income Tax Act as well as the Social Security Act - with their different, unmatching definitions of income - are generally liable to be taxed.  When the government applies its deduction policy, it not only reduces NZ Super but collects a substantial tax payment into the bargain.

The double dipping attributed to those persons who dare to claim that they qualify for NZ Super actually characterizes the New Zealand government's treatment of overseas pensions.

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