Pensioners Ask: Why Can't I Get US Social Security As Well As NZ Super

Sunday, 16 February 2025, 8:44 pm
Article: RNZ

Susan Edmunds, Money Correspondent

Pensioners who have moved from the United States say they are getting a raw deal when it comes to New Zealand Superannuation.

US Social Security is one of the international benefits that offsets NZ Super - every dollar received from the US reduces the amount that can be claimed from NZ Super. A person's entitlement can also affect their partner's pension.

But some people who live in New Zealand but qualify for US Social Security say that is not fair, because the US scheme is tied to the time someone has spent working.

This year, someone would earn one social security credit for every US$1810 in income they receive in a year. They could receive a maximum four credits a year and needed to accumulate 40 to qualify for US Social Security.

One woman who contacted RNZ said she had worked for 25 years in the US and 23 in New Zealand:

"When I reach age 65 I must first apply for Social Security and then will only receive the difference, if any, between that and NZ Super as my NZ Super entitlement. So my many years of working and paying taxes in NZ seemingly will count for nothing. I'm cut out of something every other New Zealander age 65-plus can receive.

"To my way of thinking, NZ Super is a kind of welfare benefit - everyone receives the same amount regardless of work history - while Social Security is not. While both NZ Super and US Social Security are funded through payroll taxes, Social Security is different in that it is tied to a minimum number of years working to qualify and the amount you receive at retirement is directly related to how much tax you paid into the Social Security system. Why should I not be able to receive both?

"One I am entitled to like every other New Zealander currently. The other I earned through many years of work and taxes. Is there any avenue for me to apply for an exception or such?"

The question of how contributory pensions are treated by the NZ Super offset is one that Deputy Prime Minister Winston Peters has raised in the past.

He asked then-minister for social development Paula Bennett in 2014 how she could justify it.

The current government has said no plans for change are on the agenda.

Another reader said he was worried that because the age of eligibility in the US had increased to 67, there was a cross over where he would be eligible for NZ Super but required to claim what he was allowed to access from the US, before it was available.

If he filed for US Social Security at 65, he could have his US pension reduced.

"I was injured on the job while working for the NZDF in a job where I was recruited by the government of NZ. I now receive an ACC benefit, but that benefit will terminate upon my reaching age 65 because of the ACC law requiring me to file for NZ Super. But I will not actually receive any NZ Super because I must legally file for US SS according to the NZ SS Act.

"Therefore, I either go for two years without any financial support, or I am forced to file early in the USA and take a penalty of approximately 15 percent."

But Harry Fenton, general manger of the international disability and generational policy group at the Ministry for Social development, said the deduction from NZ Super would only start once the person was entitled to receive their overseas pension.

"For example, when a person becomes entitled to their US Social Security pension scheme at the standard age - which is now 67 years old - the direct deduction will begin to apply."

Fenton said NZ Super was designed to take overseas pensions into account to ensure people in New Zealand received equitable levels of support, regardless of whether that was from New Zealand or another country.

"The direct deduction policy applies if a person's overseas pension or benefit meets the following criteria: It is administered by or on behalf of the government of a country other than New Zealand; and ... forms part of an overseas programme providing benefits, pensions, or periodical allowances for any of the circumstances for which New Zealand benefits, pensions, or allowances may also be paid. United States Social Security pension scheme is subject to the direct deduction policy because it meets that criteria.

"New Zealand law requires all recipients of New Zealand pension or benefit payments to take all reasonable steps to obtain any overseas pension that they may be entitled to receive."

Another reader said there were "no free lunches".

"Our NZ Super is reduced to zero, because our US social security payments seems to exceed it regardless of exchange rates. We are fine with that, and it seems fair not to impose a burden on NZ taxpayers …. NZ has a small taxpayer base, and we cannot afford to continue the NZ system as it is.

"US social security must not be confused with other US pension schemes, of which there are many - some taxed, some not, prior to withdrawal. They are distinctly separate entities with nothing in common.

"We also receive payments from a private US pension scheme. Foreign schemes should rightly have nothing whatsoever to do with Super in NZ. We are NZ residents, so NZ has the primary right to tax foreign pensions of its residents. It does that with great enthusiasm."

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