SUPER PORTABILITY FOR PACIFIC PEOPLE BEGINS TOMORROWPacific Island Affairs
As of tomorrow Pacific Island recipients of New Zealand superannuation will be entitled to receive their payments in the islands, Prime Minister Jenny Shipley and Pacific Islands Minister Tuariki John Delamere said today.
Mrs Shipley and Mr Delamere met with leaders of the Pacific Island community to mark the start of the new policy which was announced earlier this year.
"We made the decision to introduce the policy once the economic conditions were right, and I'm pleased to see it finally come to fruition.
"The policy recognises the significant contribution of Pacific people living in New Zealand. Many have lived here and paid taxes all their working lives and it is only right they should be able to retire to the islands with a pension."
The initiative means Pacific Island people who have been resident in New Zealand for 20 years (including at least five years after the age of 50) will be eligible to receive their superannuation in the Islands. Up to 135 people are expected to receive an immediate increase in their New Zealand Super payments as a result of the policy.
Mrs Shipley acknowledged the work of Mr Delamere, Foreign Affairs Minister Don McKinnon, and National List MP Arthur Anae, in bringing the policy to completion.
The Pacific Island leaders who met Mrs Shipley and Mr Delamere were: Mr Maposua Fani Lima (Samoa), Mrs Reva Fergusson (Cook Islands), Mr Sione Palu (Tonga), Mrs Moka Sipeli (Niue) and Mrs Akisi Renner (Fiji).
Inquiries: Raphael Hilbron 025 280 2490
Ted Sheehan 021 638 920
BACKGROUND ON PORTABILITY OF NZ SUPERANNUATION
1. What exactly has changed under this new policy?
New Zealand has always had a special arrangement for superannuation for New Zealand passport holders living in the Cook Islands, Niue and Tokelau. Under that arrangement superannuitants were entitled to 25 per cent of gross New Zealand Super.
Under the change, this entitlement will be increased and also extended to cover all of the Pacific Islands including American Samoa, Micronesia, Fiji, French Polynesia, Guam, Kiribati, the Marshall Islands, Nauru, New Caledonia, the Northern Mariana Islands, Palau, Papua New Guinea, Pitcairn Islands, Samoa, the Solomon Islands, Tonga, Tuvalu, Vanuatu and Wallis and Futuna.
People from these Islands who have been resident in New Zealand for 10 years (including at least five years after the age of 50) will be eligible for 50 per cent of the gross rate of New Zealand Super.
For each additional year that they live in New Zealand they will be entitled to receive an extra 5 per cent of New Zealand Super. (Currently they receive an extra 2.5 per cent for each additional year.) So, a person who has been resident in New Zealand for 20 years or more will get 100 per cent of New Zealand Super.
These people must be resident and present in New Zealand at the time they apply for New Zealand Super.
Other countries that are covered by General Portability continue to be so. Under General Portability a person gets 50 per cent of the gross rate of New Zealand Super after 10 years residency in New Zealand, but it does not increase beyond that for further years of residency.
2. Who will get more New Zealand Super under the change?
Those Pacific Island people who have been residents of New Zealand for 10 years or more and return to the Islands after they retire. These years need not be consecutive years, however 5 of them must be after age 50. People must apply for New Zealand Super while they are resident and present in New Zealand to be eligible to receive New Zealand Super in the Islands.
3. How many people will be affected by the change and how will they know if it applies to them?
Under the change 135 people will receive an increase in their New Zealand Super payments. This will increase if more Pacific Island people decide they want to go home after they have retired.
Those people who currently receive a payment of New Zealand Superannuation in the Pacific Islands, will be contacted by the Department of Social Welfare and told about the change to their entitlement which will automatically increase from 1 October this year. This change will also apply to people who return to the Pacific Islands after retiring in the future.
4. Can people apply for New Zealand Super from the Pacific Islands?
No they cannot. People must be resident and present in New Zealand when they apply for New Zealand Super.
This Arrangement aims to recognise those people who have contributed substantially to the New Zealand economy and so is available to people who have spent a significant part of their working lives here, who have then retired and choose to return to the Pacific Islands to live.
5. How much will this cost?
This policy will cost about half a million dollars a year ($519,000).
6. Why have the provisions been extended to all of the Pacific Island nations?
Firstly, we have amended the New Zealand Super portability arrangements to rectify the inequitable situation that existed for New Zealand passport holders in the Cook Islands, Niue and Tokelau who lived here for between 10 and 20 years. These people receive less New Zealand Super than people in other countries who met the same criteria.
Secondly, we have extended the arrangement to all Pacific Island nations to recognise the close relationships New Zealand has with its Pacific neighbours. The people who come from the Pacific Islands to work here contribute to the New Zealand economy and this is one way that we can recognise that contribution. As one of the larger nations in this part of the world New Zealand has an important role to play in the Pacific.
7. What does this mean about our special relationship with the Cook Islands, Niue and Tokelau?
We will always have a special relationship with these three countries and this is recognised in New Zealand law. The change to this Arrangement improves the position of the people receiving New Zealand Super in these countries. However, rather than singling out recipients in these countries, we want to take this opportunity to enhance our relationships with all our Pacific Island neighbours.
8. Why not extend these provisions to all countries?
New Zealand has negotiated agreements with some countries to manage the costs associated with retirees in each country. These agreements are in line with international pension cost sharing principles. This particular change in policy recognises the special responsibility New Zealand has in the Pacific.
9. How will this be taxed?
Currently, we pay New Zealand Super gross to these recipients. The future tax treatment of New Zealand Super paid into these countries is still to be resolved. We do not yet have enough information to say what would be appropriate tax treatment. That will be determined before the policy change is implemented on 1 October, this year.
10. Shouldn't we have social security agreements with the Pacific Island nations?
Some of these countries are too small to negotiate such agreements. Requiring some of these countries to enter social security agreements would be a great cost on their small economies. This is not an impact that we want to have on these, our closest neighbours. This change is a recognition of the special responsibility New Zealand has in the Pacific.
11. How will this affect the social security agreements New Zealand has with other countries?
This should not affect any of New Zealand's social security agreements. Those countries will recognise the special responsibility New Zealand has to countries in the Pacific. New Zealand will continue to look at negotiating social security agreements outside the Pacific where appropriate.
12. What are the long term costs of the policy change?
If the current proportion of Pacific Island people continue to return to the Pacific Islands in retirement, the cost is estimated to increase by around $1.5 million per year, in 20 years time. If more people decided to return to the Pacific Islands, these costs would be higher, but they would be offset by lower New Zealand Super payments in New Zealand. Payments in New Zealand are at a higher rate than in the Pacific Island countries for some recipients.