Overseas pensions
New Zealanders who work overseas risk losing their NZ Super.
Overseas retirement funds which resemble NZ Super are defined in the law as overseas pensions.
Under the terms of the Social Security Act 1964, all overseas pensions are by definition captured by section 70 and thus subject to the direct deduction policy.
Overseas retirement funds which do not resemble NZ Super are defined as income.
Under the terms of the Act, an overseas pension cannot be income. The two categories are mutually exclusive. The chief executive of the Ministry of Social Development explains:
“If a person receives an overseas pension that does not meet the criteria in section 70 of the Act, then the pension is not defined as an overseas pension but as income. The Ministry is required to use the definition of income and overseas pensions that are specified in the Social Security Act 1964.
“As income, the pension from overseas will not affect the rate of payment of New Zealand Superannuation. However, a pension from overseas that does meet the criteria will be deducted under the terms of section 70 from the superannuitant’s entitlement to New Zealand Superannuation.”
The Act's distinction between overseas pensions and income encourages preposterous claims.
The former government used the Act’s definitions to claim that overseas pensions are not funds that people have saved for their retirement. Former Social Development Minister Ruth Dyson asserted:
"The majority of overseas pensions are not considered to be private savings."
The definitions make it possible for the Retirement Commissioner to announce, to the utter disbelief of many:
“New Zealand Superannuation provides income independent of lifetime incomes”.
The Ministry similarly maintains:
“NZ Super is not income tested; direct deduction is neither an income test nor an asset test”.
Such claims persist in large part because the definition of income under the Social Security Act does not match the definition of income under the Income Tax Act. Overseas pensions are certainly treated as income under the Income Tax Act and are generally liable to be taxed. NZ Pension Abuse regards section 70 as an income test resulting in 100% deductibility.
There is no objective measure or collective standard to determine if overseas retirement funds resemble NZ Super. The distinction is made exclusively “in the opinion of the chief executive”.
The Act defines an overseas pension to be any pension administered by a foreign government which the chief executive deems similar to New Zealand Superannuation. (Government occupational pensions and payments made for such similar purposes as an ACC payment, a War Pension or a Disability Allowance in
The chief executive’s wide discretionary powers are not subject to a second opinion: rulings on whether particular overseas retirement funds resemble NZ Super do not have to be explained or justified, or ratified by any other body.
The effect of the law is to remove individual entitlement to large amounts of overseas retirement savings.
The Act ensures that as soon as the chief executive deems a fund an overseas pension, all the associations that income normally evokes - of private property, personal entitlements, options and responsibilities - vanish.
Though not required to detail how similarities between the retirement programs of
The intention to remove individual entitlement was deliberately written into law and is deliberately implemented.
The effect of the legislation - the definition of overseas pensions, the deduction of NZ Super, and the decision-making power granted to the chief executive - is not accidental. The law represents a very deliberate determination to target the funds of overseas earners. It is fundamentally discriminatory, despite government protests that it cannot be so since it affects New Zealand-born and foreign-born workers alike.
Although the Act has been revised over several decades, no government has taken the opportunity urged by reformers as distinguished as Sir Guy Powles to specify the criteria by which a pension from overseas can be deemed comparable to NZ Super. Governments without exception have much preferred to retain legislation which, by giving the chief executive exclusive and arbitrary interpretative power, provided the maximum scope for netting overseas-earned funds.
Discrimination will persist until New Zealanders collectively decide it is unacceptable.
Inasmuch as they arbitrarily expunge individual entitlements, the overseas pensions sections of the Act continue to turn tens of thousands of New Zealanders who worked overseas into second-class citizens.
The law relating to overseas retirement funds will change when New Zealanders collectively recognise its predatory nature and repudiate the mechanism by which earnings-based retirement savings are arbitrarily deemed state benefits.
Superannuitants shortchanged
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