Tempted to fudge the facts? Hold that thought - then tell the truth when applying for Super. Photo / Getty Images
OPINION:
Q: Having recently helped an older friend of mine apply for NZ Super, I noticed that the form asks if you have ever worked overseas. My friend had, but friends of his had told him to answer "No" to this question. Apparently, if he said "Yes", he was in for loads of extra paperwork. Is this correct?
I worked overseas from 1979 to 1982 and have no record of who I worked for and how much I earned. I know that at least one of the companies I worked for no longer exists — so I too will be tempted to lie when it comes time to apply for Super.
Can you tell us exactly what information MSD needs from us? Chances are it is not as difficult as people make it out to be, but until I know exactly what information I need to provide, the temptation to lie will probably prove to be irresistible.
A: Ooooh! Boomers fibbing to the Government about their handout! Something tells me this is not going to help our generation's reputation amongst the young.
The Government requires people applying for NZ Super to also apply for any government pensions — not corporate pensions — they have earned while working overseas. The amount of these pensions is subtracted from their NZ Super, somewhat reducing the huge sum of taxpayer money that goes into Super.
Controversy has raged for years over which overseas pensions should be included, because each country's system is different. But that's not the issue here — and let's not revive it again.
When you apply for NZ Super, you are asked whether you have ever lived or worked in any other countries, the dates you arrived and left there (the month is good enough) and your purpose.
You are also asked, "Do you get or qualify for a social security benefit, pension or allowance from overseas?"
If you're unsure, "then we assess, based on whatever overseas residence you've indicated on your form, whether we think you meet the age and minimum residence requirements for an overseas pension," says Jay Van Uffelen, general manager centralised services at the Ministry of Social Development. "If we think you do, then we send you information about this and ask you to apply.
"The information you need to provide depends on what country you've lived in. We have special agreements in place with Australia, Canada, the United Kingdom, Denmark, Greece, Malta, the Netherlands, Ireland, Jersey, Guernsey and South Korea that allow us to help by sending you the forms you need to submit."
Typically, a "special agreement" country might require details on countries you have lived in, employment info and so on. But some ask for more. In Australia, for example, "the pension is income and asset-tested, meaning you will also need to show proof of your income and assets.
"If your overseas employment was a while ago and you're struggling to remember all of the details then don't worry. You're only expected to provide this information to the best of your memory," says Van Uffelen.
If you've lived in a country off that list, "we send you a letter template that you can use to inquire with that country and find out what you're entitled to."
He adds, "It's worthwhile taking the time to apply for the benefits or pensions from overseas countries you have lived in, because it will mean you're getting paid your correct entitlement and won't have to worry about getting penalised for supplying incorrect details."
What might happen if you don't follow the rules?
On your NZ Super application form, you sign to acknowledge that what you have said is true and complete, says Van Uffelen. "We can investigate cases of suspected fraud that come to our attention.
"The best advice we could give is that when it comes to all government information, honesty is the best policy. In our experience, most people follow that mantra."
What if MSD catches someone who has lied?
"If we find out that any information you give us is not true, or that you knew information you should have told us and did not tell us, then that could mean we have incorrectly assessed your entitlement.
"This could mean your payments stop, you might need to pay money back, we may impose a penalty, and you could be prosecuted. The action taken would depend on what information has been withheld or misrepresented."
Most of us are going to receive many thousands of dollars of NZ Super over several decades. If some of us have to go to a bit of hassle when signing up — to save the country some money — that's not unreasonable.
Also, do you want to spend the rest of your days worrying about being caught?
Q: Appreciate your insight re my situation.
As a Kiwi, I recently applied for NZ Super at age 66. I knew I had to delay the request, as I have spent the majority of my working life overseas.
I had to wait a year or so to comply with the 10/5 year regulation (that I had lived in NZ for 10 years since aged 20, with at least five years since turning 50). I am now advised that in September 2022 (I will then be 67), I will finally be eligible.
While that rule is accepted, I highlighted to the authorities that funds earned overseas were sent to NZ, and once I had accumulated enough for a deposit, I bought a property. I let that property and paid tax on the rental income. In later years, I added a further rental property, consequently increasing my tax payments.
My question: as I have been paying NZ tax for 30-plus years, is there a logical reason why those payments don't supersede the 10/5 year rule and qualify me for a pension at 65?
Why is my physical non-NZ location the overriding factor?
A: Because entitlement to NZ Super is not related to whether you've paid tax. That's one of the beauties of the scheme. People who have paid little tax — perhaps because of health problems, or in days gone by because they were a "homemaker" raising children — are entitled to the same Super as top income earners.
But obviously we need to give Super only to New Zealand residents. And the lawmakers have defined that — in this situation — as people who have spent a fair bit of their adult lives here.
The "10/5 year regulation" is actually generous by international standards. Starting in July 2024, the 10 years will gradually be extended to 20 years by July 2042.
I understand your point. But I don't like the idea that overseas New Zealanders in a strong enough financial position to be paying tax here would get better treatment than other offshore Kiwis.
Q: This is the first time I have ever written to the Herald, but after reading about the couple wishing to distribute some of their financial assets back to the community, but wanting to ensure it was a worthy NZ cause, I wanted to add a suggestion.
How about setting up scholarships for secondary school students at the end of their final year, to assist with their university or tertiary education expenses? The money could be paid directly to the tertiary provider to assist with fees.
Low-decile secondary schools could be chosen where often there are talented, intelligent students who have very little monetary support, and choosing to go to university can be a daunting idea. What better way to encourage these young adults to make a better life for themselves which would then flow on to NZ society?
I was at the local college's prizegiving several years ago and one student was awarded a $500 scholarship. Though it was not a large sum, it was the affirmation that she was worthy and that people wanted to help her achieve her university goal. It was amazing to witness her stunned reaction and tears of absolute joy as her name was read out.
A: That's a great suggestion. Yes, acknowledging someone can be powerful, even if the money involved is not huge.
A similar idea would be to give grants to writers, artists, musicians or other creative people struggling to earn a living while giving joy to others. This could be done through organisations such as the Society of Authors.
Q: I read with interest last week's item about giving away money. I am in a similar position.
In discussing wills with my lawyer recently, she pointed out that if I feel passionately about various charities, I should consider making donations starting now rather than leaving any gifting until my demise. She highlighted that given my current financial circumstances and modest lifestyle, I was unlikely to run out of money.
If I donate money now I effectively leverage a further third through the donations rebate (subject to not making donations exceeding my taxable income).
A: You're quite right. As well as taking pleasure from giving while you are still around, you can claim tax credits for donations of $5 or more — something your estate can't do.
"You can claim 33.33 cents for every dollar you donated to approved charities and organisations," says ird.govt.nz. "You can only claim on donations that added up to the same amount or less than your taxable income during the tax year."
So for every $100 you give away, you get $33.33 back. And of course you can turn around and donate that tax credit if you want to. For more info see tinyurl.com/NZtaxcredit.
More on giving to charity next week.
Q: Good article in the Herald last weekend in support of reverse mortgages!
I have just ticked up 20 years in the business, and amazingly still find a lot of misinformation in the marketplace, often in the legal profession, so strong support for the right reasons from you carries a lot of weight.
I work mostly with Heartland now because their product is the most flexible. For example, they are the only ones to offer a loan on a secondary property.
In 20 years — if done for the right reasons — all clients are happy. They will often report a few months after the loan is in place that they should have done it sooner, that they did not realise how much stress was in their lives and their relationship because they simply had no cash for any unforeseen expenditure.
A: I agree about the misinformation. It leads to some people getting a reverse mortgage when they don't need it yet, running up an unnecessarily large debt because of compounding interest. Meanwhile, others are too afraid of the debt, overlooking that their homes will also increase in value over the long-term. As you say, a reverse mortgage can really improve someone's life.
On sources of advice, let's just say that it pays to check the credentials of those giving the advice. Some lawyers know heaps about reverse mortgages, some very little it would seem.
Q: I read about the couple with two properties, and your suggestion that they get a reverse mortgage on their home. I have another option to offer up: sell the $2 million house and move into the bach.
They could spend enough to make it more comfortable and access-friendly, and still have at least $1.5m to live on. The advantages are: free up capital to live on; still have the bach for making family memories; still able to leave the bach to family; I assume the bach will be a much more peaceful and cleansing place to live. Don't see that many downsides, and it's what I would do in the same situation. Why choose an option that erodes the capital when you don't need to?
A: I assumed last week that the couple would have thought of that and rejected it for some reason. Perhaps, for example, the partner with terminal cancer needs to stay close to medical facilities. But maybe not. So cheers for writing.
Q: Thanks for last week's informative answer, as usual, to my letter about dividend reinvestment plans.
I guess by now you've realised the mention of Mercury Energy in your reply, instead of Genesis Energy in my query. Easy to do.
A: Oops! To clarify, both Genesis Energy and Mercury Energy offer dividend reinvestment. Genesis recently restarted its plan, and Mercury has just started its one. Sorry if anyone was confused.
- Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com or click here. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.
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