Retirement Commissioner Jane Wrightson has warned proposed law changes would endanger the welfare of migrants and returning expats just two years from pension age as early as July this year.

The 10-year residency requirement to receive NZ's universal pension is set to double to 20 years after the governing Labour party indicated it will continue to back a private member’s bill first introduced by NZ First MP Mark Patterson and picked up by National's Andrew Bayly after last year's election. 

The Green party was the only dissenting voice when the New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill passed its first reading in 2018 and repeated that opposition in a minority report on the proposed law change. 

According to Wrightson, the changes are being implemented too soon and older people will not have enough time to “make alternative financial plans”.

“Any changes to New Zealand’s retirement income system need a long lead time to enable people to adjust their financial pathway. Ideally, the changes would not take effect for another 10 years to enable people to plan.

“If older New Zealanders cannot access NZ Super as soon as two years from now, what are their alternatives?”

In a statement, Wrightson acknowledged that Parliament’s finance and expenditure select committee added transitional arrangements so the residency requirement would be phased in by birth date.

BusinessDesk previously reported that the committee said: “People affected by the change would, almost overnight, be faced with a substantial delay of up to 10 years before they were eligible for superannuation.”

“We believe that the change would be unfair on those people, who may be significantly financially disadvantaged by the proposed change,” the committee’s report said.

Taking your time

The committee proposed introducing the longer residence requirement through a phased increase by birth date.

For every two complete years a person was born after July 1, 1955, they would need one additional year of residence, up to a maximum of 20 years.

Anyone born on or after July 1975 would be subject to the full 20-year residence requirement.

Wrightson said it would be beneficial if people affected by the bill could stay in employment for longer, but “we know that older workers experience difficulties in the labour market, including longer periods of unemployment and age discrimination”.

“We do think there is potential for hardship, within such a tight transitional timeframe, because this change would be unexpected,” she said.

Meanwhile, the vast majority of submitters on the bill as originally drafted said it was unfair.

A number of submitters said they had made specific financial plans based on the current residence requirements and would face significant financial hardship should the bill progress without transition arrangements.

“It is clear that many are highly distressed by the possibility of needing to wait an additional 10 years,” the Ministry of Social Development said.

Some submitters saw the proposed change as racist because it would heavily impact older migrants from China and India, while having no or more limited impacts on migrants from social security agreement partner countries, such as the UK and Australia.

All recipients of NZ Super are New Zealanders, either as citizens or as permanent residents. The bill would affect New Zealanders who had spent long periods of time living and working in the United States, Asia, or some European countries. And those who had lived in Australia for much of their career would have to wait until they reached the Australian pension eligibility age, increasing to 67 by 2023, before receiving NZ Super.  

Wrightson issued the first purpose statement for NZ’s retirement income system last year, which stated the framework must remain stable “to enable trust and confidence that older New Zealand residents could live with dignity and mana, participate in and contribute to society, and enjoy a high level of belonging and connection to their whānau, community, and country”.

“Stability, trust, and confidence are not created by changes that impact people in two years’ time,” said Wrightson. “I encourage Parliament to slow down the progress of the bill and consider whether its transitional arrangements could be improved further to ensure a more considered long-term approach.”