The government has just flicked off the 2016 Retirement Commissioner’s 3-yearly review of retirement policy with a raft of inadequate responses.
The pathetic justifications for the status quo from the Minister of Consumer affairs make the whole exercise farcical.
Let’s take the outrageously unfair rule that means a person’s pension can be docked if their spouse gets an overseas pension.
Review after review has complained about this. Some spouses find to their disgust and surprise they get less or even no NZ Super, even though they have lived all their lives in New Zealand
Here is one of many cases:
“I was absolutely horrified to discover recently that I might not be eligible to receive my National Super when I turn 65. I am married to a 70 year old American who worked for just under 20 years in the US before he settled in NZ. He then worked full-time for a further 27 years in NZ. When he applied for NZ Super in 2011 he ended up being given US Social Security instead. I have lived all my adult life in NZ, and worked full-time for about 35 years (34 years for one employer), before retiring early in 2012, and have since worked part-time, and continued to pay tax. Now I find that I am to be severely penalised/simply because I am married to an American.”
Even the Ministry for Social Development Briefing to the Incoming Government (2014) stated:
There are policy and technical issues related to [section 70] that could be addressed. For example, one of the most unpopular aspects of the policy is that, where one partner of a couple has an overseas state pension that is more than their New Zealand Superannuation, the excess amount is deducted from the New Zealand Superannuation entitlement of the other partner.
The best estimate from MSD is that in 2016 there were 500 couples affected by the spousal provision, and the average amount deducted is $4,000 per year – about $2m total per year.
NZ Super is an individual entitlement but the cost of marriage for 500 hapless spouses can be very high.
So what did the Commissioner’s 2016 review say? Couldn’t be clearer:
Remove spousal/partner deductions with immediate effect.
Here is the government’s response to this festering sore:
The Government does not support removing spousal/partner deductions. The purpose of spousal/partner deduction is to ensure that coupled with an overseas pension received the same level of government- administered retirement income as lifelong New Zealand couples.
Talk about comparing apples to oranges! For some spouses, it may be a recent second or third marriage to someone who just happens to have an overseas pension. Even if it is a longer relationship, why should the spouse gets less when the pension is an individual entitlement. The basis for the so-called “spousal provision” is the outmoded assumption that one spouse’s income is available to, and should be used to support, the other spouse.
It is bad for the democratic process when government to fails to address such a clear injustice especially in this case when it poses little fiscal cost. But we don’t seem to know how to do sensible retirement policy any more.