Special Banking Option

A Review of NZ Superannuation,
Shrouded in Secrecy

Former Social Development Minister Steve Maharey, responding to letters objecting to the direct deduction policy, would magnanimously point out that superannuitants can in fact receive full New Zealand Superannuation by "taking advantage of the Special Banking Option", an option available to all persons eligible for overseas pensions. Persons agreeing to accept the Special Banking Option can receive NZ Super payments in full - that is, provided they turn over their entire foreign retirement income to the New Zealand government.

The Special Banking Option is intended to benefit the government both financially and in terms of convenience. It does not benefit the pensioner. The government cannot legally force anyone into accepting the SBO; nevertheless stories continue to surface of people - even in their late eighties - being bullied and threatened by Work and Income New Zealand into acceptance.

The Special Banking Option was first set up to cater for United Kingdom migrants only, most of whom had been seeing their tiny frozen pensions flowing into New Zealand government coffers directly until 1996 under the New Zealand - UK Agreement. In 1996, however, the UK said it would no longer pay the pension directly to the New Zealand government due to privacy considerations. The International Services Department of the Ministry of Social Development introduced a very negative campaign blaming the UK government for "changing things". It was obvious that the direct deduction policy was going to involve a lot of work (with monthly letters, for example) if UK pensions - like many Dutch pensions since 1994 - had to be administered individually. WINZ consequently introduced the SBO system for UK migrants and later opened it to Dutch migrants after discussing it with the SVB (Sociale Verzekeringsbank) in the leadup to the 2003 New Zealand - Netherlands Agreement.

All the advantages of the Special Banking Option belong to WINZ. It is a mechanism to improve the efficient administration of the deduction policy but does nothing to relieve individual pensioners of responsibility for the correct payment of the overseas pension. Under the SBO, mistakes are harder rather than easier to put right. The onus is on individual pensioners to repay any government overpayments or try to recover underpayments. Having accepted the SBO, they must still complete annual life forms and receive correspondence directly from the overseas payment office.

Some pensioners consider the Special Banking Option a good system because they get the same amount in their bank account from month to month instead of the mix of monthly payments and fortnightly super payments. In essence they have exchanged their overseas pension for a New Zealand one.

NZ Pension Abuse considers it unwise to trade pensions which, being individual rights, should be treated with respect. The argument that, "It's easier for you to get one payment instead of two", is also insulting, in that it implies pensioners cannot administer their affairs and find more than one source of income confusing.

The Special Banking Option has been shown to be particularly unsuitable where the couple's combination of overseas pensions is higher than the half-married rate (where only one partner qualifies in his/her own right) of NZ Super: the excess pension is difficult to recover from WINZ if the decision to accept the SBO was incorrect.

It is prudent to get good advice about the Special Banking Option before accepting it. However, NZ Pension Abuse considers it a legally obnoxious mechanism introduced by WINZ for WINZ to confiscate honourably-earned pensions from migrants with as little effort as possible. Its trade-off character makes it distasteful for anyone who understands that the New Zealand government abuses pensioners.