News

February 2007

The ball is in our court

Messages from Parliament between October and December 2006 indicated that the prospects for a social security agreement between New Zealand and the United States were in jeopardy.

Under the terms of the Supply and Confidence Agreement between New Zealand First and the Government, the two parties have agreed to work together to investigate ways to improve options for senior citizens who may be eligible for foreign pensions as well as New Zealand Superannuation.  Signs of back-tracking came in the form of a letter from New Zealand First’s Deputy Leader Peter Brown regretting that there would not now be a social security agreement with the US because of the stance taken by the US.  When questioned, Mr Brown replied that he had been advised by officials that the US was opposed to an agreement with New Zealand.

The United States has never been opposed to an agreement with New Zealand.  On being made aware of the advice given Mr Brown, the Associate Commissioner of the US Social Security Administration promptly issued a statement confirming once more that the US is not opposed to an agreement with New Zealand.  Furthermore, the Commissioner implied that the real impediment to an agreement is the current lack of interest in holding discussions on the part of New Zealand’s MSD officials.

Copies of the Commissioner’s letter were sent to Mr Brown and Mr Benson-Pope.  Mr Brown replied immediately, pledging to do everything in his power to obtain a social security agreement with the US.  The Minister however countered with a lame assertion that his Government was not opposed to an agreement - but an agreement would remain elusive if concessions had to be made exclusively by New Zealand!  (The US has already made a major concession: although the US has been put in the position of being the largest subsidizer of NZ Super amongst non-agreement countries, it has refrained from insisting on the removal of the widely-condemned direct deduction policy as a condition to any agreement.   To date, the New Zealand Government has offered no terms at all.)  Click here to read the SSA letter.

Many people would ask, “What could possibly be the reason for the current Minister’s intent to create obstacles to a reciprocal agreement with the US or the portability of US Social Security payments - either of which would benefit thousands of New Zealanders?”

The Minister is either being seriously misinformed or he has chosen to ignore the decision of our Embassy in Washington, the recommendations of government officials, and the conclusion of his predecessor Hon Steve Maharey, who saw “the ball in our court” as far back in 2001 - an admission that it was New Zealand, not the US, that would have to make changes.

A letter written in 2001 by Mr Maharey to fellow Cabinet Minister Hon Lianne Dalziel discussed a meeting between Mr Maharey and then US Ambassador Carol Moseley-Braun on social security issues.  Mr Maharey - who has often maintained that an agreement with the US is unlikely due to cost considerations - confided to Ms Dalziel that the Ambassador subsequently wrote to the Prime Minister pointing out that if the NZ Government could agree to a reciprocal agreement, it would mean a net financial gain for New Zealand.  As far as is known, neither Mr Maharey nor the Prime Minister has ever mentioned the Ambassador’s letter or disclosed its content outside Cabinet.  Click here to read Mr Maharey's letter.

The Maharey/Dalziel letter -is a rare example of a Cabinet Minister speaking candidly about NZ Superannuation policy.  Observations such as, “That leaves the ball in our court”, and, “New Zealand’s system is giving US citizens a raw deal”, have a frankness not found in any of the Government’s public correspondence on superannuation matters - correspondence almost always written for the Minister in Ministry of Social Development officialese.

FOOTNOTE:  Replying to specific questions put to the Ministry of Social Development, Chief Legal Advisor Mr Doug Craig did not deny that his department had advised the New Zealand First Deputy Leader of US opposition to an agreement with New Zealand.  He also declined to comment on whether or not similar advice had been given to the Minister for Social Development..

September 2006

Overseas Pensions Targeted

The Ministry of Social Development published a table listing the total amounts of overseas pensions from non-agreement countries deducted from New Zealand Super entitlements for the seven years ending June 2006.  The table revealed that the New Zealand Government's capture (the Ministry's word) of pensions from these countries had increased twelve fold in just six years.  That is to say, despite consistent advice from its own officials that the direct deduction policy is seriously flawed, discriminatory, and in dire need of reform, the Ministry had quite deliberately made every effort to extend it.

The table confirms that amongst all non-agreement countries, the United States of America is by far the biggest subsidizer of New Zealand Superannuation.  It also confirms that MSD/WINZ has indeed been targeting Asian pensions.  Although the total amounts involved are relatively minor, the increases in ‘captured’ Asian pensions have been dramatic: NZ Super reductions in respect of pensions from China, for example, have increased three fold over the last two years, and in respect of pensions from Malaysia, five fold.

During the past 6 years the following countries have been added to the the existing list of non-agreement nations whose pensions are subject to Section 70 under the authority of the Chief Executive of MSD:

Austria, Bulgaria, China, Cook Islands, Croatia, Czechoslovakia, Fiji, Finland, France, Hong Kong, Hungary, India, Israel, Italy, Japan, Republic of Korea, Malaysia, New Caledonia, Peru, Philippines, Poland, Western Samoa, Singapore, Tahiti, former Union of Soviet Socialist Republics, former Yugoslavia.

How, it may be asked, has WINZ managed to increase the total amount of NZ Super reduced in respect of pensioners from former Yugoslavia seven fold over the past year?  One employer’s account is illuminating:

“We recently hired a Serbian immigrant who had arrived with his parents 10 years ago.  He went through the New Zealand education system; his parents are naturalized New Zealanders.  His father, now 72, has just met the 10 year residence requirement for NZ Super.  When he approached WINZ to claim his NZ Super entitlement, he was asked if he had any entitlement to a foreign government pension.  He explained he did - a small pension from the old Yugoslavian government - but as he cannot take any currency out of that country, he is receiving none of it.  WINZ officials are adamant that it is his problem: he is entitled to the pension and therefore it will continue to be deducted from his NZ Super entitlement!”

Retirement Commission claims

 The Retirement Commission contributed an article in the September issue of Grey Power:

The ANZ-Retirement Commission Financial Knowledge survey recently asked a sample of Kiwis whether they thought NZ Super was asset or income tested.  Thirty eight percent mistakenly said they thought it was income tested, while 27% believed it was asset tested.  NZ Super is not asset or income tested unless you also receive a pension from an overseas Government.

The last ten words were a new addition, inserted in response to widespread public criticism; they had not appeared in any of the Retirement Commissioner's many prior attempts to publicise how "mistakenly" the New Zealand public perceives NZ Super.  Yet the insertion does not make her statement any more truthful: the Commissioner's third sentence blatantly contradicts her second; moreover, her statement implies that the overseas pensions are paid by the foreign Governments - there is no acknowledgement that the vast majority are in fact personal savings, albeit under those Governments' administration.  It is not at all surprising that 38% of New Zealanders know full well that NZ Super is income tested: they include those receiving overseas pensions as well as other members of the public who have not been taken in.

It is difficult to put any other interpretation on her choice of words or on her repeated choice of the same subject-matter emphasising the public's mistake than that the Commissioner is continuing her deliberate attempt to mislead the New Zealand public - including Parliament.

Petition

The New Zealand Parliament answered the petition as follows:

The Social Services Committee has considered Petition 2005/60 which requests a select committee inquiry into the appropriateness of, and the administration applying to, direct deductions under section 70 of the Social Security Act 1964.

We understand that aspects of New Zealand superannuation, including the direct deduction provisions contained in section 70 of the Social Security Act 1964 which impact on equity issues for those with private overseas contributory pension schemes, are currently being reviewed by the Government.

We believe that it is inappropriate for the committee to duplicate the work of this review. However, given the ageing population and immigrant component of New Zealand’s current demographics and the widespread concerns conveyed by the petitioners, the Government’s review should be accorded urgency.

We support the work being done to resolve issues around deductions to overseas pensions and recommend that the Government make plain the aims, scope, and timing of the review.

The report was a strong statement.  The five parties on the committee (Labour included) - representing an overwhelming majority of Parliament - unanimously agreed to seek specific commitments from the government regarding the pension reform program it had promised.  The report carried an expectation that the government would respond within 90 days with a public announcement detailing its program.

Last modified: February 21, 2007