The Deteriorating Relationship with the United States

On the Fourth of July 2005, outgoing US ambassador to New Zealand Charles Swindells publicly launched a scathing attack on current attitudes and outdated policies retained by the New Zealand Government.  Ambassador Swindells went so far as to say that where a close relationship with the US is concerned, New Zealand was becoming increasingly irrelevant.  Although the ambassador not once mentioned the word “nuclear”, there was little doubt he was alluding to New Zealand’s anti-nuclear stance as an impediment to good relations and to a free trade agreement with the United States.  However, in his attack the ambassador was also alluding to New Zealand’s retirement policies.

US Social Security legislation requires the US Government to refuse Social Security payments to eligible foreign citizens, when they leave the US, of any nation that is considered to treat American citizens unfairly in terms of social insurance rights.  This legislation does not affect some 200 world nations but is limited to “rogue” states such as North Korea, Libya - and New Zealand.  Civil servants from Wellington have made a number of trips to the US in futile efforts to find a way around the US legislation.  American diplomats have called on Parliament asking the New Zealand Government to amend the NZ Social Security Act so that US citizens living, working and paying taxes in New Zealand are not treated unfairly.  New Zealand authorities have refused to consider these requests from US officials.

In November 2003 New Zealand’s highest ranking diplomat in Washington, Ambassador John Wood, conceded that all efforts to obtain social security arrangements with the US had failed and that the impasse between the two nations would only be broken if New Zealand made legislative changes.  It had taken NZ Embassy personnel 40 years to recognize the obvious.

Ambassador Wood also cautioned that the current government in Wellington would not make the required changes without constituency support.  As has been shown on this website, instead of attempting to gain constituency support however, the Labour Cabinet has deliberately concealed the recommendations made by the nation’s advisors on NZ Super and Portability from all political opposition as well as from its own junior Members of Parliament and backbenchers.

According to the 2000 census, there are approximately 16,000 New Zealanders living and working in the US.  Three reports (known as the Pensions & Politics papers) were prepared by a private citizen and published on websites in North America alerting expatriate Kiwis to the loss of their investments in US Social Security if they left the US.  The reports explained the reasons, blaming the NZ Government as being entirely responsible for the situation.  The NZ Government was also accused of failing to make any attempts to inform its many citizens in North America of the situation.  The reports also alleged that NZ authorities were totally indifferent to the plight of thousands of New Zealanders facing the loss of their retirement savings.

Possibly in response to the Pensions & Politics papers, the NZ Embassy attempted to provide NZ citizens in North America with factual information concerning Social Security on its website.  In highlighting the reasons for the failure of eligible Kiwis to obtain US Social Security, the Embassy’s website acknowledges that American citizens working in New Zealand are being denied NZ social insurance rights they have earned through the taxes they have paid to the NZ Government.  This is the first (and believed to be the only) official admission that New Zealand is treating US citizens unfairly.  The website could be viewed by anyone, including the US Social Security Administration.

When the Deputy Commissioner of the International Division of the US Social Security Administration (SSA) commented, “We continue to monitor the situation with New Zealand at all times”, he meant it.  In 2004 the SSA obtained a complete copy of the Court Summary of the Roe Case as well a copy of Crown Law’s rejection of Ruth’s complaint to the Human Rights Commission.

The Crown Law document has special significance: it confirms that the NZ Government will deny a state pension to its own citizens whenever it can manipulate the US into providing that retirement income.  Moreover, the Crown Law document confirms that the NZ Government is only interested in obtaining a social security agreement with the US as a source of revenue that can then be used to lower the operating costs of NZ Super.

In January 2005, Sarah Patterson, an American attorney specializing in US Social Security, visited New Zealand.  In earlier years Ms Patterson had won a difficult Social Security case involving a New Zealand citizen, and partly as a result she had become familiar with details of the Roe Case.  She had also studied a number of pension appeals in the NZ High Courts, as well as the Crown Law rejection of Ruth’s case and Robert Hesketh’s refusal of legal assistance.

In Christchurch, Ms Patterson had a meeting with Labour MP Tim Barnett, discussing US Social Security, NZ Super and the lack of portability between the two countries.  Before returning to the US, Ms Patterson submitted a letter to Parliament through Mr Barnett.

Although there is no direct reference to the Roe Case, Ms Patterson’s letter questions decisions made in the NZ High Courts involving US Social Security.  She makes the statement that NZ civil servants have misunderstood and misrepresented US Social Security and as a result the Courts have been wrong in their decisions.  A copy of her letter was given to Ruth, another copy filed with the SSA in Baltimore.

In April 2005, the SSA received a prepared summary and copy of the February 2003 Review of NZ Superannuation and Portability.  Of major interest to the SSA was the review’s emphasis on the advisability of a social security agreement with the US, and how it was essential for the NZ Government to remove the obstacles to such an agreement.  The SSA has since been briefed on the refusal of Dr Cullen and Mr Maharey to consider changes to NZ Super facilitating an agreement with the US.

American authorities may have sympathy for the plight of Ruth and other pensioners in New Zealand but their primary concern remains the unfair treatment of American citizens.  It is not so much the denial of a state pension to Ruth but the denial of a state pension to Ruth’s American husband Bill (and other qualifying American citizens) that is of paramount concern.

Not only has Ruth been denied NZ Super, but so too has her husband Bill - one of many Americans who have fully qualified, in their own right, for NZ Super but are denied the “Universal Pension” because of investments made in the US Social Security program.

The US has further objections concerning New Zealand’s treatment of American citizens.  Even if they have spent most of their adult lives working and paying taxes in New Zealand, if not actually resident in New Zealand on reaching 65 years of age, American citizens are denied the right to NZ Super.  New Zealand gives them nothing.  Although there are no statistics available, this is the way a great many Americans have been denied social insurance rights they earned in New Zealand.

For Americans who are actually resident in New Zealand on reaching 65, if they wish to go back to the US in retirement the NZ Government will pay them only half the going rate of NZ Super.  Here, statistics are available: a total of just 19 persons are receiving NZ Super payments in the US (and at just 50% of the going rate).

These are the obstacles the government has been urged to remove.  The SSA’s former chief negotiator, Barry Powell (who more than once described NZ authorities as “exasperating”), made the following statement:

“If New Zealand removed the unacceptable restrictions it imposed on American citizens, and if a person in authority in New Zealand sent me a formal diplomatic note to that effect, the United States would free the pension funds of NZ citizens literally overnight.”

When the removal of restrictions on US citizens was first proposed to Minister Steve Maharey, his reaction was one of horror: “But we would have to do the same for everyone else!”  Exactly - and New Zealand would be that much better off.  Why do Cabinet Ministers not seem to realize that in the present situation, New Zealanders are the major losers?  By removing restrictions, millions of US dollars would start pouring - “overnight” - into New Zealand.

On March 24 2006, Dr Cullen reaffirmed, once and for all, that his government is not prepared to accept the recommendations of its officials, or the advice of the NZ Ambassador to Washington, with regard to a social security agreement with the United States.  The Deputy Prime Minister makes it clear that the government does not consider an agreement with the US a major objective, nor will it remove the obstacles blocking the way to an agreement:

“In the government’s view, what is required is for the United States to recognize the unique nature of New Zealand’s superannuation scheme.”

Dr Cullen can rest assured the United States has never had any difficulty recognizing New Zealand’s superannuation scheme as unique.

When the government refuses to listen to its advisors, for those New Zealanders working in the US wondering if they have a home to come back to, the outlook is bleak.  Many will see in the government’s words an unambiguous message:

“We don’t want you back here.  If you must return, we suggest you come back only as American citizens.”

New Zealand’s anti-nuclear policy may be the foremost impediment to a free trade agreement with the United States, but it is not insurmountable.  Ambassador Swindells hinted as much in his departing speech.  However, Cabinet’s opposition to changes that would lead to a social security agreement with the US (basically, the refusal to implement changes to our retirement program that would provide equity for eligible American citizens) has now become a major factor.  In view of Cabinet’s obstinacy, it is inconceivable that Congress and the Senate would sanction any free trade agreement with New Zealand.

It is worth noting that across the Tasman, Australia has both a social security agreement and a free trade agreement with the United States, beneficial to all Australians.  In the meantime, an unprecedented number of New Zealanders working in the US have been applying for American citizenship to protect their rights to US Social Security.  In doing so, they have no choice but to renounce all allegiance to New Zealand and the Crown.  This is the lasting legacy of the current government. 

Last modified: February 21, 2007