'You can't be friends with anybody any more': Flatmates say Winz thought they were lovers and cut their welfare

Karel Modderman and Shirley Eyre are flatmates living in Howick. They say Work and Income wrongly believed they were a couple, and cut their pension and welfare payments.

Two Auckland flatmates claim they were hounded by fraud investigators who were convinced they were a couple.

Karel Modderman, 68, said he had his pension cut as a result of the Ministry of Social Development investigation earlier this year. And Shirley Eyre, 61, said her welfare entitlements were reduced.

Investigators said they lived together, went on holidays together and emotionally supported each other, which made them a de facto couple - a finding that the two strenuously reject.

Advocates say the case highlights the harmful and intrusive nature of many welfare fraud investigations.

Modderman and Eyre spoke at an event in Auckland this morningat which a group of NGOs called on Prime Minister Jacinda Ardern to end what they feel are punitive and harmful rules for beneficiaries in relationships.

Modderman, a former IT engineer at Fulton Hogan, said he first met Eyre when they were boarding together in 2013. They later moved in together as flatmates, and Modderman said he supported Eyre when she was sick, such as by driving her to medical appointments.

While sharing a flat in Howick, they believed two friends who were jealous of their financial stability spoke to MSD, claiming that they were a couple.

Investigators interviewed their neighbours and their family, and trawled through seven years of banking, health and travel records. They found that the two had travelled overseas together and that Eyre once called Modderman her partner on a hospital form - which she later explained by saying that he was a support person.

MSD concluded that they were a couple, which they were required to declare. They decided against a fraud prosecution, but lowered Modderman's pension and Eyre's welfare to the couples' rate.

The two said they could no longer afford their rent payments on the new rate, and he had started dipping into his life savings.

"We were just normal flatmates," Modderman said. "We shared some bills, there was no relationship, no sex.

"You can't be friends with anybody any more," he added. "I cannot be good to another person because they think that is a relationship."

MSD could not discuss the case without a privacy waiver.

But spokesman George von Ooyen said changes had been made to improve the way MSD had investigated fraud.

Officials spoke to clients about their situation in the first instance, and had made it easier for them to correct their payments if they were wrong.

"Where we think fraud is being committed we will investigate," von Ooyen said. "We only look to prosecute the most serious and persistent fraud."

MSD had also made changes to make sure any information-gathering was appropriate.

This was partly in response to an investigation by the Privacy Commissioner John Edwards, which found that MSD had breached beneficiaries' privacy in its fraud investigations, in one case getting an intimate picture from a telecommunications company.

Groups including Child Poverty Action Group, Auckland Action Against Poverty and ActionStation todaycalled for further changes to the way MSD treated beneficiaries when they entered a relationship.

Beneficiaries' payments can be reduced or removed when they are in a relationship "in the nature of marriage".

The group of advocates want couples to be paid the same rate as two single people. And they want benefits to be individualised, so a person does not lose money if their partner earns extra money on top of their benefit.

"Couples on benefits are the poorest of the poor," said Child Poverty Action Group economics adviser Susan St John.

Their core benefit rate placed them below the Government's official poverty line, which is 50 per cent of the median income after housing costs have been deducted.

The advocates may get their wish, but not for several years.

Social Development Minister Carmel Sepuloni confirmed today that MSD's rules for relationships would be reviewed as part of the medium-term reforms of the welfare system - over the next two to four years.