Superannuation shock for 65-year-olds

Bill Humphrey's United States pension leaves his wife Ruth feeling short-changed. Picture / Martin Sykes

Hundreds of New Zealanders are not receiving their full superannuation payments because their spouses receive an overseas pension.

Legislation enshrined since 1964 requires New Zealand super payments to be reduced so a married couple where one partner receives an overseas pension do not receive more than a married couple where both draw New Zealand super.

The present entitlement for a couple is $940 gross a fortnight.

But the provision was a shock to Mandy Dempsey, who believed she was entitled to full superannuation when she turns 65 on Thursday.

She was initially advised by her local Work and Income office in Takapuna that she would receive $470.32 before tax every fortnight, but that was later retracted by its Wellington office.

Mrs Dempsey was told her superannuation entitlement would be cut because her American husband receives monthly social security payments from his homeland.

It is believed her super will be reduced by about a third to $309 gross fortnightly, although Mrs Dempsey has yet to be officially advised.

"This is discrimination and a contradiction to the belief of New Zealanders that there is universal superannuation for all."

She said it was an injustice for someone who had been paying tax since 1963, and amounted to means testing for a superannuation scheme that purported not to be means-tested.

Her husband, Bill, was equally puzzled by the law's rationale.

He said he was saving the New Zealand Government money by not drawing a pension here, which he is entitled to.

The Dempseys are not alone. The Ministry of Social Development has records of 342 people affected by its "deduction policy", although the figure is "indicative".

A ministry spokeswoman said the policy ensured fairness.

"If they were to receive a partial overseas pension entitlement as well as their New Zealand superannuation, they could be considerably better off than someone who has lived all their life in New Zealand, paid their taxes and retired here."

The minister, Steve Maharey, said the issue was reviewed four years ago, but "not enough concern" was raised then to warrant a policy change.

How it works

* Section 70 of the Social Security Act 1964 requires a benefit to be reduced if the total received exceeds entitlement.

* In the case of a married couple where one partner draws an overseas pension, Work and Income will reduce its New Zealand super payment so it does not exceed the total entitlement if both partners were drawing New Zealand superannuation. The present entitlement for married couples is $940 gross a fortnight.

* The fortnightly entitlement for the spouse drawing New Zealand super can be roughly calculated by subtracting the overseas payment for a fortnight in New Zealand dollars from $940.