Changes to the residency requirements for New Zealand Superannuation will be delayed for two years to give those facing the most immediate impact some time to make changes to their lives.

Parliament completed the committee stage of the New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill on Wednesday.

The bill in the name of National MP Andrew Bayly had been delayed after concerns were raised by the Retirement Commissioner over the impact.

Commissioner Jane Wrightston had said there was potential for hardship within such a tight transitional timeframe.

The bill will phase in the residency requirement from 10 to 20 years. Originally the bill, as drafted by New Zealand First, would have had the law change take place immediately.

This was changed to a phased-in process during the select committee stage, which led to the bill picking up the support of Labour, thus guaranteeing its passage.

The latest change will mean the phase-in period will begin in 2023, not when the bill is passed by Parliament.

Bayly said the changes had been agreed with ministers after taking into account it would delay cost savings for the government.

Retirement planning

The Retirement Commissioner had “expressed some discomfort” that the progressive increase to 20 years would commence straight away.

The changes would now begin July 1, 2023, “so that people have more time to consider matters of their superannuation, and, if need be, to start planning for working an extra period of time, so that once those provisions start to cut in, then there is more time available to do the planning”.

Only the Greens opposed the bill, with Ricardo Menéndez March saying, while there was a place for debate about the sustainability of NZ super, “this bill is very much specifically around the impact that our migrant population has on the cost of NZ superannuation, and it very specifically targets a community”.

Bayly said the bill was not about any specific group, but moving NZ’s residency requirements to 20 years which “is by far the norm overseas”.

“If you're a refugee and you arrive here, and you're 55 and older, you're not caught by these provisions. You only have to work the 10 years, as long as you stay in NZ and work. That's a specific provision to protect refugees.”

The bill completed its committee stage on Wednesday and will receive its third reading when members’ bills are next considered.

The select committee's changes mean the increase to residency requirement will be phased in 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.

There are different and more relaxed rules for those living in NZ’s realm territories – the Cook Islands, Niue, and Tokelau.

Unable to work

Ministry of Social Development's (MSD) advice to the committee estimated implementation of the graduated change would cost $2.548 million in the 2021/22 financial year.

With the graduated implementation, MSD said savings (from paying out less super) would begin at $0.609 million in the 2022/23 financial year and increase gradually to $162.6m per year by the 2041/42 financial year (which is about 0.3% of NZ Super expenditure).

The reason savings are lower than the actual reduction in super payments is because many people will qualify for other benefits as they will be unable to find work.

MDS said there were about 840 people granted superannuation in the year ended August 2020 who only had 10 years of residence. About 4,400 people had 10-to-19 years of residence recorded. This was out of 56,278 people who were granted the benefit in the same period.

Currently, super is payable to any NZ citizen or resident aged 65 or over who has been “resident and present” in NZ for 10 years after the age of 20, and five years after the age of 50.

A number of submissions on the bill said, as it was originally drafted, many would face significant financial hardship.

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.

Many expatriate, or returned expatriate, New Zealanders suggested an increase could be unfair for them.