Diana Clement: Beware the pitfalls of NZ Super sooner rather than later

Some Kiwis find out too late that they're not entitled NZ Super or the full payment they'd banked on. Photo / File

COMMENT:

One day most of us hope to give up work and retire. For most Kiwis, New Zealand Superannuation kicks in at age 65.

You're not going to live in the lap of luxury, granted, but the income prevents the majority of people being forced to work until they drop.

NZ Super has rules, however, and woe betide anyone who is a square peg in a round hole. Some Kiwis find out too late that they're not entitled to NZ Super, or the full payment they expected.

At risk in particular are Kiwis who have been on extended OEs.

The biggest pitfalls are for Kiwis and foreign-born residents who have paid into overseas pension or superannuation funds. Under the Social Security Act, the government has the right to reduce your NZ Super dollar-for-dollar if you, or in some cases your partner, receive an overseas pension.

Getting two state pensions is considered double dipping.

Even Kiwis who have never left the country can get caught out if they have married an immigrant. This rule is currently being reviewed under the Ministry of Social Development's "superannuation reform work programme".

Kiwis who have been on an extended OE are sometimes shocked to find on their return that they're not entitled to NZ Super. I need look no further than friends and family to see people in this situation. They presume that they can retire to NZ at 65 and pick up NZ Super as a birth right. But currently you need to have lived here for 10 years since age 20, with five of those years since you turned 50, to claim the full entitlement.

You may have worked for 20 or more years before going overseas, but if you didn't live here for the minimum of five years between the age of 50 and 65 you will not be eligible, says Sissi Stein-Abel, an NZ Super campaigner.

Really, it makes sense that NZ Super isn't paid to people who haven't contributed to New Zealand. But it can be harsh to come home and find that you have to wait five years to qualify.

However, New Zealand First's New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill is looking to change the requirement to have lived in New Zealand from 10 years to a minimum of 20 years.

Another issue for some retirees are the "portability" rules that govern whether they can follow children or partners to another country and still get NZ Super.

One of the portability rules that surprises me is that you won't receive any NZ Super if you leave the country before age 65. "Imagine a Kiwi who has lived and worked all their life in NZ but moves to another country at age 64 ... no NZ Super," says Stein-Abel.

If you want to retire to the Gold Coast, think again. Kiwis who retire to Australia are only entitled to receive as much NZ Super as they would receive under the Australian Age Pension. The catch is that's income and asset tested, and not universal.

"Many Kiwis have to give up their dream of spending their twilight years in the sun," says Stein-Abel.

Following Cupid's arrow overseas later in life can be troublesome too. Stein-Abel quotes the case of a woman who moved overseas to be with her foreign husband. She has to return to New Zealand every year in order to continue to collecting NZ Super. And it will get even more problematic once the couple is no longer mobile enough to travel.

Another example she cites is a Kiwi woman who married a German man later in life. She gets only $6 a week in NZ Super because the value of his pension is deducted from her entitlement.

The list goes on. NZ Super is of course a great benefit of being a Kiwi or resident. However, you need to be thinking about your NZ Super entitlement throughout your working life, not just come age 65.