Left out in the cold: The pensioners who won't be getting this year's upgraded Winter Energy Payment

News of the increased winter payment only served as a reminder for Jan and Marcus McKeogh that they were left out. Photo / Supplied

News of the increased Winter Energy Payment (WEP) has been "heart-wrenching" for a select number of Kiwis who cannot receive it due to a controversial legal loophole.

But Social Development Minister Carmel Sepuloni says a line has to be drawn somewhere, and those who miss out can still apply for hardship grants.

For some it's the difference of just a few dollars in their pension payments that dictates whether or not they can receive the money.

The Winter Energy Payment for 2020, which runs for 22 weeks from May 1 to October 1, has been doubled, meaning eligible couples and people with dependent children are set to get $63.64 a week and single people $40.91 a week.

But Christchurch woman Jan McKeogh is one Kiwi who won't be taking advantage of the increased payment due to a policy which allows her New Zealand pension to be deducted so long as she or her partner receive an overseas pension.

Under the Social Security Act 1964, if someone receives a pension from overseas, their own New Zealand pension will first be deducted, then the balance is also taken from their partner in a process called spousal deduction.

Jan and Marcus McKeogh are both eligible for the New Zealand pension, but don't receive a cent of it.

The couple lived and worked in Germany for some years and contributed 9 per cent of their salary to their pension there. It is similar to KiwiSaver - which New Zealanders can still receive without it affecting their own pension.

"It's approximately the same as the New Zealand super ... but we're just over the limit of what you would get here."

Depending on the currency exchange rate, the couple receive about $10-20 more in their German pension than they would from the New Zealand pension.

If they received even a dollar of New Zealand pension, they would be eligible for the WEP.

McKeogh is in her early 70s and must continue to go to work as a teacher to help keep the house warm over winter.

When she heard this year's WEP would be doubled to help those suffering through the pandemic, she was "gutted" to realise they would still be missing out on the payment.

"We've experienced hardship just like everybody else," she said.

Sepuloni told the Herald the reasoning behind the exclusion was partly to do with providing a simple and easy-to-administrate payment, but that part was also to do with "drawing a line" and recognising some people receiving overseas pensions were getting "significantly" more money than those on the Kiwi pension.

"The assumption that can be made is that those who are getting overseas pensions ... are likely to be getting more than what the New Zealand Super scheme provides anyway."

She said about 600 people were subject to the deductions on their pensions.

The WEP was about impacting people on low incomes and older people who were more at risk of respiratory issues over winter, she said.

"We wanted the complexity of administration to be as reduced as possible."

The payment benefits more than one million people around the country.

Part of the deduction policy which allows a person's pension to be deducted due to what their partner receives from overseas is due to be scrapped soon, and when that happened Sepuloni believed a large portion of people would start receiving the WEP.

She encouraged those who couldn't to apply for hardship support if they needed it.

"There is always going to be a line that is drawn with regards to who is eligible and who isn't."