General policy statement
This Bill proposes a pro rata entitlement (PRE) to New Zealand superannuation (NZS) based on residence and presence in New Zealand between the ages of 20 and 65 years; a period of 45 years, or 540 months.
The Bill confronts the demographic realities of an increasingly ageing and mobile New Zealand population and its impact on NZS. These global trends require fair policies for the New Zealand taxpayer, the migrant, and the expatriate Kiwi who return to New Zealand to retire.
Within the OECD, NZS is unusually generous in terms of residency requirements. For example, a migrant who lives in New Zealand for 10 years may make little or no contribution to the New Zealand economy, yet is entitled to full NZS. Under the PRE system, this migrant is entitled to 120/540 of NZS, but retains any overseas government pension which is currently deducted from his or her NZS under the direct deduction policy (DDP).
Another example is an expatriate Kiwi who has worked overseas for 30 years, contributing to another economy, and has most likely earned an overseas pension. On returning to New Zealand to retire, he or she is also entitled currently to full NZS. Under PRE, with 15 years’ New Zealand residency, this returning Kiwi is entitled to 180/540 of NZS, but will also retain his or her overseas pension, which is currently deducted.
Within the age period between 20 and 65 years, the Bill disregards up to 2 months’ overseas travel per calendar year. The Bill also exempts an aggregate period of 5 years’ absence for New Zealand residents born in New Zealand, whose rite of passage may cover their overseas experience, education and training (often bringing back exceptional skills), and, of course, the well-earned extended world cruise.
A person receiving PRE to NZS has spent some part of his or her working life overseas. Currently, under section 70 of the Social Security Act 1964, those with overseas pensions from reciprocal agreement countries, and those with other overseas government pensions, have their overseas pension deducted from their NZS under the DDP.
As a consequence of PRE to NZS, the DDP provisions are repealed, so that all these overseas pensions will be retained by migrants and expatriate Kiwis, which is their fair proportional entitlement from their contribution to those overseas countries.
Consequently, there is no further need for the reciprocal agreements pertaining to pensions that New Zealand has with 9 countries. With each reciprocal agreement, there is a 12 month termination period available to each country of each reciprocal agreement on request.
The NZ diaspora is estimated at 1 million people, of whom 500 000 are in Australia. As overseas governments raise the age of eligibility, and tighten pensions and healthcare, New Zealand becomes a more preferred retirement destination.
This Bill addresses the gross unfairness on future New Zealand taxpayers by introducing a pro rata entitlement to New Zealand superannuation based on residence and presence. This legislation positively distinguishes those Kiwis who choose to stay and work in New Zealand between the ages of 20 and 65 years.