Overseas pension pain a problem of equity, say academics

23 February 2010

New Zealand’s inconsistent approach to overseas pensions – resulting in a disturbing range and number of complaints to the Human Rights Commission, Minister of Social Development and other agencies – must be rectified urgently before more immigrants are affected, three academics warn.

Susan St John, Michael Littlewood and Claire Dale of The University of Auckland Business School’s Retirement Policy and Research Centre say many immigrants to New Zealand with overseas pension entitlements from state schemes are being disadvantaged and, with migrant flows increasing, they predict the problem will only grow.

In the run-up to the Centre’s February 24 Pension Forum – to be opened by the Chief Commissioner for the Human Rights Commission Rosslyn Noonan – the Centre has released its findings from three working papers documenting the historical and current legislative and policy frameworks surrounding entitlement to New Zealand Superannuation (NZS) for immigrants and emigrants.

”This enormously complex issue is one that New Zealand must sort out urgently so that prospective migrants are properly informed,” the researchers warn.

“Although it tarnishes our international reputation for fairness, the way we treat those with overseas state superannuation entitlements has direct fiscal benefits for the New Zealand Government. They are saving approximately $200 million annually by denying full New Zealand Superannuation to about 52,000 people with overseas pensions.

“Most of these people are immigrants, but seven percent are New Zealanders who have paid into foreign state-administered pension schemes when working overseas.

“Ironically, New Zealand pays New Zealanders with overseas pensions to leave, by allowing them to take a pro rata gross NZS payment with them, while making them potentially poorer when they stay. At the very least, we should be more consistent.”

At the same time, the potential for fiscal ‘black holes’ in pensions and healthcare is made worse by New Zealand’s relatively low eligibility requirements, the trio says.

“New Zealand desperately needs a principles-based approach to reform of overseas pensions treatment for entitlements to New Zealand Superannuation – one which is a more transparent and fairer alternative to the current rules-based approach, provides a clear line for complainants, supports accountability, discourages violations of the letter and spirit of the rules, and promotes both assent and trust.”

While there can be no single or simple solution, two possible options for change have been outlined by the Centre:

  • Raise the residency requirement for New Zealand Superannuation from the current 10 years to 25 years, with that residency to be achieved between the ages of 20 and 65.
  • Abolish residency rules for most immigrants and take a pro-rata approach to New Zealand residents applying for superannuation who are also entitled to an overseas ‘basic pension’.

The pension forum will be held on Wednesday February 24 from 1pm to 5pm in Case Room 3 at the Business School.