Ideasroom

Time for action on overseas pensions

Hon Associate Professor Susan St John is from the Department of Economics in the University of Auckland’s Business School. She is director of the university’s Retirement Policy and Research Centre. 

The unfair spouse pension rule will be scrutinised in the Human Rights Review Tribunal in a case beginning in Wellington today. Three of the affected superannuitants will argue they have been unlawfully discriminated against under the Human Rights Act 1993.   

These superannuitants, represented by the Office of Human Rights Proceedings, are disputing the so-called ‘spousal provision’ rule. This rule means that if your spouse receives an overseas pension, not only is their New Zealand Superannuation reduced by the same value, but any of their overseas pension left over is deducted dollar for dollar from your pension. 

My colleagues and I at the University of Auckland’s Business School-based Retirement Policy and Research Centre, and the Retirement Commissioner, have been calling on successive governments to change this for many years. It is based on the outmoded assumption that one spouse’s income is available to, and should be used to support, the other spouse. 

Most usually, those affected by this rule have a spouse from the United States, Canada, Germany, The Netherlands, Norway or Italy, but they themselves may have lived all their lives in New Zealand, and may even be on their third marriage, or in a relationship of short duration.   

While married superannuitants still get a lower rate than singles, New Zealand Super for those not affected by the spousal provision remains as an individual entitlement. Why then should you lose this individual entitlement just because you’re married to someone getting an overseas pension? 

The best estimate from the Ministry for Social Development is that in 2016 there were 500 couples affected by the spousal provision, and the average amount deducted was $4,000 per year which amounted to a total of $2m per year.  

Clearly, there is hardly a fiscal risk to removing this rule, yet the social costs of failing to address a clear injustice, including a loss of confidence that there is a rational policy making process, are enormous. 

We are hoping this case will open the way for a thorough overhaul of the way overseas pensions are treated.  The Spousal Provision is only one part of this. This overhaul also requires a proper review of the low residency requirements for New Zealand Super and the highly favourable treatment of Australia immigrants under an outdated agreement. 

-Associate Professor St John, and co-researcher Dr Claire Dale who is also from the University’s Retirement Policy and Research Centre, wrote a report on issues around overseas pensions for the Retirement Commissioner’s 2016 review. It is available here.  

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