New Zealand Superannuation: The Rules Versus Common Sense

Tuesday, 21 September 2021, 12:25 pm
Article: Keith Rankin

Radio New Zealand (Checkpoint) ran stories last week about New Zealanders aged over 65 stranded in Australia who are at risk of having their pensions ('New Zealand Superannuation') stopped, and then having to repay the funds they received while in Australia.

There is a simple solution to the problem – to just keep paying stranded pensioners their pensions, and to withdraw any threats to require repayment when they eventually return to Aotearoa. The problem is compounded by the rigidity – and general unavailability – of Carmel Sepuloni, the Minister of Social Development who oversees the 'benefit system'. While it is true that she appears to be perhaps the least competent of government ministers (few say it, but many think it), it also is apparent that she and certain other ministers – most notably Immigration Minister Kris Faafoi and Senior Citizens Minister Ayesha Verrall – are being closely micromanaged by their seniors. On Friday's (17 Sep) Covid19 press conference, I waited for Minister of Finance – one of the senior ministerial minders of Sepuloni, Verrall, and Faafoi – to put the matter straight, and assure stranded pensioners that common sense would prevail. But he said nothing.

The key RNZ stories are these:

15 Sep: Pensioners stuck in Australia ask for 'Jacinda's kindness'

16 Sep: Assoc Health Minister on Covid-19 cases, pensioners in AUS (interview with Ayesha Verrall)

16 Sep: 'Devastated' woman who could not return from Australia faces pension cut

Before discussing the general issue, and how the government can easily stop this issue – and others – from festering, I should note the phenomenon of the Radio New Zealand trolls. Some RNZ programmes invite – or attract – more listener feedback than others. Checkpoint is one of the more prominent programmes in this regard. Some of the feedback, which is mentioned throughout the programme along with a brief slot just before the 6pm news, can only be called 'trolling'; this term derives from the social media practice of posting or sending cruel messages. The RNZ trolls tends to argue along the lines of: 'you knew the rules, you took the risk', with maybe the addition of 'I could have gone to Australia when you did, but chose to stay on my [trolling] couch instead'. Like younger social media trolls, these mainly older trolls are conspicuously unsympathetic to others (in a sadly self-centred way), they lack any real sense of empathy for the myriad sets of circumstances that other people face, and tend to take pleasure from the misfortune of others. Sadly, again, I believe that the present government sees such trolls as an important part of its voter base; the optics of this government – as shown through the media appearances of ministers such as Sepuloni, Faafoi, and Verrall – are that the government itself lacks sympathy and empathy.

(A big lacuna in economic theory is in its inability to address the reality that some people's utility – pleasure – arises specifically from the disutility – pain – caused to others. Not only do we seen this generally in the phenomena of trolling and most pornography, we also see it in the way that too many people see 'houses' as financial levers that make themselves richer while necessarily making others poorer. Land hoarders should also be understood as trolls.)

The Rules in this Case

The specific New Zealand Superannuation problem arises in part because most superannuitants see their payments, broadly, as a 'return on investment', whereas the government sees New Zealand Superannuation as a social welfare benefit. Both perceptions are somewhat muddled.

Senior citizens only 'worked for their pension' in a collective sense; thus New Zealand Superannuation can be seen as a reward for forms of contribution other than through businesses and through paid employment. One important contribution is that of 'failure', in the important sense that the success of some – in businesses or otherwise – can only have meaning when contextualised against the non-success of others. A gold medallist at the Olympic Games can only succeed, as a gold medallist, because of the participation of the other competitors who 'failed' to win. Thus, New Zealand Superannuation works as a reward 'without judgement' of what a person's contribution may or may not have been.

The government sees New Zealand Superannuation as a cash benefit that – as they also see other benefits – must be wrapped around with a set of rules. Generally, governments would like to see even more (or tighter) rules attached to New Zealand Superannuation, but are afraid to act in a way that ensures the optics of New Zealand Superannuation will make it look even more like a welfare benefit and even less like a return on investment. (This is why it is the 'oldies' are the group most impassioned to keep New Zealand Superannuation as it is, even though most proposed tightenings of the rules would only adversely affect 'youngies'. The 'oldies' are a substantial block of voters, who, for the most part, cling tightly to the view that superannuation is quite distinctly different from other benefits.)

There are a number of completely unnecessary rules around New Zealand Superannuation that relate to overseas travel. These rules make sense from a government perspective – because governments like beneficiaries to be fettered by rules (in part because they believe that many of their electors are beneficiary-unsympathetic trolls), and because governments see superannuation as a benefit. But they make no sense from a 'return on investment' viewpoint.

Further, receipt of the universal pension (ie New Zealand Superannuation) enables seniors to continue with – even to extend – their contributions to New Zealand. Many do this by staying in paid work or self-employment or continuing to run businesses; they understand that they will not be penalised by having their pensions withdrawn or abated. Other seniors contribute through invaluable contributions to the voluntary sector. Many make their ongoing contributions as grandparents, which in many cases is a surrogate parent role. Further, with the globalised world that we became accustomed to in the 1990s and the 2000s (and to a lesser extent in the post-GFC 2010s), grandparents may be required just about anywhere in the world; it's pretty much a matter of chance whether a given senior person residing 'permanently' in Hamilton has grandchildren in Invercargill, Rockhampton, or Saskatoon.

So, the rule that constrains pensioners from international travel is a rule that need not be there. Such a rule serves no useful purpose.

Nevertheless, given that the rule is there, what should the New Zealand government do for people caught out by the rule? The obvious answer is to suspend the rule for people caught out by pandemic restrictions, health emergencies, flight cancellations etc. There would be much political kudos arising from such application of common sense, and almost no political downside; the issue would simply drop-off the news cycle.

But no, the government knows better. Instead, they have promised to arrange a relief flight from Sydney; and they offer stranded pensioners the chance of a place in the MIQ (Managed Isolation and Quarantine) lottery. Not only is all this very uncertain and unnecessarily stressful – indeed it may not be easy to arrange interstate travel from, say, Launceston, and pre-flight covid testing requirements are not always easy to fulfil – it misses the point that the best solution for stranded grandparents may not be to bring them home at all. If they are helping their grandchildren and adult children in places like Oamaru or Bateman's Bay or Niagara Falls, it may be better that they are supported to stay there and continue making those contributions. And if such seniors do a few scenic trips in Australia or elsewhere, it should neither be the concern of the government nor the trolls. After all, many New Zealanders made many sacrifices in their lives so that they could retire and then go on a 'trip of a lifetime'. Many of our 'baby boomers' have now had that prospect snatched away from them. Yes, they may be able to do scenic trips within New Zealand in 2022; but it's not for the government or the trolls to control where superannuitants go to on their retirement travels. It makes no sense to say they can stay in Caroline Bay, but not the Sunshine Coast.

Was the present hiatus foreseeable?

The present rule has an out-clause. Superannuation payments may be continued if affected persons apply on the grounds that their new situation was 'unforeseeable' (refer to the Ayesha Verrall interview above). Now the trolls and the government say that, despite opening up green flights across the Tasman Sea with the express purpose of facilitating tourism (the main discussion point then was the economic need to host Australian tourists here), it was fully foreseeable that trans-Tasman tourists might be stranded on the wrong side of the ditch for many months or even for years.

I would argue that this was not foreseeable, given both the promotion of 'the bubble' and the seeming resolution of the covid crisis. There had been no 'Level 4 lockdowns' since April 2020. My view that the present strandings were indeed unforeseeable is confirmed by Prime Minister Ardern's repeated claims that "Delta changed everything", and that the much stricter level of restrictions from August 2021 was only deemed necessary as a result of a 'Delta strike' that she herself (and her officials) had not foreseen. (Indeed I myself am booked to visit my daughter and grandchildren in Australia this December; in early June I could not have foreseen the present crisis on both sides of the Tasman Sea to the extent of choosing not to arrange this trip. I now know my chance of being able to travel is close to nil, and I know that – even if my flights are not cancelled – I could not contemplate going in December.)

The fact that Jacinda Ardern makes such stock of her government's inability to foresee 'Delta' surely means that other less-briefed people could also not be expected to foresee the predicament now faced by stranded superannuitants. The government's inability to foresee the present situation would surely constitute legal grounds for such stranded people to claim the continuance of their pensions on the basis that – within the present rules –the circumstances they now face were 'unforeseeable'.

-------------

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

© Scoop Media

Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

Contact Keith Rankin

• Website - Kieth Rankin