In New Zealand, the magical age for 'retirement' is 65. At this age, you are entitled to receive the NZ Superannuation income.
If you are eligible to receive NZ Super, you will receive the same amount regardless of whether you are male or female, regardless how much you earn, or how many assets you have, regardless of how much you have worked or earned during your life. The simplicity of our universal NZ Superannuation entitlement is in stark contrast to most countries where the income that you receive is impacted by all the factors just mentioned.
NZ Super is paid at different rates based on your living arrangements and your tax rates only. If you are single and living alone and have a tax rate of 17.5% you would currently receive $19,475.56 after tax a year ($749.06 a fortnight). If you are married and both eligible, each person would receive $14,981.20 after tax a year ($576.20 a fortnight) (Total of $29,962.40 pa after tax.) If you are still earning and have a higher tax rate, the after tax income that you receive will be lower.
However, there are some important rules that may affect your entitlement to NZ Super. These include:
1. The status of your relationship and living arrangements
2. Whether you travel outside New Zealand for more than 26 consecutive weeks a year
3. Whether you have lived in NZ for the appropriate periods of time prior to age 65 to be fully eligible for NZ Super
4. Whether you or your life partner receive an overseas pension income
5. You have to apply for NZ super in the weeks before you reach age 65, there are no back payments.
Rob Stock of Sunday Star Times wrote a good article outlining issues that people had encountered that they took up with the Social Services Appeal Authority. It can be found here: Pensioners breaking NZ Superannuation rules risk missing out.
However, it is so good, that I thought I should replicate the article below.
Pensioners breaking NZ Superannuation rules risk missing out
New Zealand Superannuation is the jewel in the crown of our pensions system.
Envied overseas, it's as simple a system as any country has devised.
It is a universal pension and it is not means tested in any ordinary way. But that surface simplicity hides a complexity that trips some people up, and that can cost the over 65s dearly.
How are you planning for retirement?
RELATIONSHIP SCRUTINY
It's not just a priest or a marriage celebrant who can pronounce you married. Work and Income can do it too.
Cases before the authority illustrate it can inquire into the personal lives of recipients who live in unusual circumstances. They do this because people get different rates of NZ Super depending on their living situations.
In one case, two people decided to live together as friends.
He was 77. She was 66. But instead of paying them the "single sharing" rate of NZ Super ($396.17 a week before tax), Work and Income decided to pay them each the married, or de facto, rate ($326.30).
It had investigated their living arrangements and decided they were in a relationship "in the nature of marriage".
The had met at a dance 16 years ago and regarded themselves as flatmates, taking holidays and spending Christmas together. They shared a bedroom.
After contemplating these facts, the authority decided Work and Income were right under the terms of the Retirement Income Act.
In another case, Work and Income even accepted there was no sexual relationship between two people living together, but decided they were a de facto couple.
Evidence included testimony from a Work and Income staffer who knew them socially.
The authority agreed "on the balance of probabilities" that Work and Income was right.
In neither case were past "overpayments" demanded back. Work and Income wanted that, but the authority did not think the people had intentionally mislead the department.
There is an onus on people getting NZ Super to tell Work and Income if they are being paid too much, tempting as it may be not to.
NO BACK PAYMENTS
Don't just expect the NZ Super payments to start when you hit 65. You have to apply.
The onus is on you to apply a few weeks in advance of your 65th birthday.
If you fail to apply, don't expect back payments. One man thought he couldn't get NZ Super while still working.
When he realised that was wrong, he sought a back payment. The authority agreed that Work and Income didn't have to pay.
FORWARD PLANNING
Many of us don't plan our lives particularly well. That can come back to haunt us later.
Take the case of one many who lived here for 30-odd years, then headed to Samoa to take up the role of a village elder. He only returned in 2012, applying for NZ Super in 2013, and was initially granted it. Then someone at Work and Income realised the man had not met the minimum residency requirements for NZ Super.
To be eligible for NZ Super a person must have lived in New Zealand for10 years after the age of 20, with five of those years since the age of 50. While he had spent more than 10 years in New Zealand in total, he had not spent at least five years here since age 50.
The man said he "had no thoughts of New Zealand Superannuation" when he headed off to Samoa. The system does not forgive these mistakes.
There is some lobbying for making the residency requirements tougher which is a reminder that rules can be changed. Before moving overseas, it is worth researching entitlements so you know when you need to come back by.
THE FOREIGN PENSIONS BUGBEAR
Many New Zealanders work overseas at one time or other. Many others are immigrants who have done so.
And many are probably unaware that if they qualify for an overseas pension, their NZ Super payments can be reduced by the amount of those payments. That can even cover some pensions built up from contributions made from people's own salaries while working in another country.
The rules demand people applying for NZ Super also apply for any overseas pensions they may be entitled to, which may then be taken to help pay for their NZ Super.
Failing to apply when asked can result in NZ Super payments being stopped, or never started, as one man found when he was faced with having to fill in long, complicated forms from the Australian authorities, who he saw as bullies.
His refusal imperiled his NZ Super payments.
The NZ Super payments to spouses of people with overseas pensions can also be reduced by the amount of those payments. Take the example of one man whose younger wife received a pension from Britain at 62. As a result his NZ Super payments were reduced.
The moral of this is that your NZ Super payments can be lower than others' depending on who you fall in love with.
Campaigners against this have so far failed to sway successive governments to reform the rules.
The authority acknowledged: "There are some issues around the deductibility of the overseas pension of a spouse from entitlement to New Zealand Superannuation which leave an impression of unfairness and which cause resentment."
LINGERING OVERSEAS
People receiving NZ Super need to plan their jaunts overseas carefully.
NZ Super is mainly a domestic payment, and in most cases, recipients need to be permanently based in New Zealand and can only go on temporary forays overseas.
With the exception of some Pacific Islands, people can be "absent" for 30 weeks and can continue to collect NZ Super for the first 26 weeks.
One couple were gone for more than 26 weeks. Work and Income swaps data with Immigration and spotted it.
It demanded nearly $1000 back. There was an excuse. The elderly man had sinus trouble and was told to delay his return.
The money still had to be repaid.
- Stuff
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For more blog entries that you might be interested in:
Retirement Planning – Why assumptions are important
Do you have super in the UK or USA? Or have you brought it back since 1st January 2000?
By Carey Church
