Linda Sanders: take the money and run

By Linda Sanders In Money

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Many of us dream of living our “freedom years” in the warmth of an endless summer near a white sandy beach. But if you want to access state superannuation, you’ll need to plan carefully to ensure you can bask in the sun while being paid your New Zealand entitlements.

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A reader writes she lived in New Zealand for 59 years, 40 in full-time work. Ten years ago, she and her husband opted to reside in Rarotonga. Now at retirement age, she says they can’t receive super unless they return to New Zealand full-time or spend six months in each place.

She quit her job and travelled to New Zealand to become eligible and “had to jump through a range of very difficult hoops”. In Rarotonga they don’t use a Gold Card or rely on the Government to pay for health care, so she argues it seems fair they receive payment there.

A British couple I know travel between here and England every six months, enjoying each hemisphere’s summer. Since they don’t qualify for full residency, they pack up in New Zealand in autumn to avoid outstaying their welcome. Living in retirement in your preferred country is an international issue, it seems.

It turns out the Ministry of Social Development is changing the rules regarding residency and pensions in the Cook Islands, Nuie and Tokelau, given their close constitutional ties as part of the Realm of New Zealand.

New special portability arrangements announced this month are expected to apply from July 2015 and will allow eligible residents to apply for their superannuation or veteran’s pension from these Pacific countries.

The practical effect of the change is people entitled to superannuation, regardless of whether they’re of Cook Islands, Niuean or Tokelauan origin, will be able to leave New Zealand to live in one of those three countries after 55 and apply, without returning here, for their super once 65. Currently they’d have to stay in New Zealand until turning 65 to qualify.

Retirees will still need to qualify for superannuation. They must have been “resident and present” in New Zealand for more than 10 years since the age of 20, including five years from the age of 50.

Our reader should check the effect of the changes on her circumstances.

For others pondering retirement elsewhere, the ministry says to be entitled to superannuation a person must:

• have reached the age of entitlement,
• be ordinarily resident in New Zealand on the date they apply for superannuation, and
• have been resident and present in New Zealand for at least 10 years since the age of 20, including five years after age 50.

Super can be paid overseas in some other ways.

Temporary absence provisions
Superannuitants can leave New Zealand for up to 26 weeks and receive super. They can continue to be paid if further absence is due to circumstances such as a sudden illness or an outbreak of war.

General portability provisions
To receive superannuation under these rules, the person must apply to take his or her payment overseas before leaving New Zealand. Until 2010, only 50% of the full rate was payable under these provisions.

Social security agreements
New Zealand has social security agreements with Australia, Canada, Denmark, Greece, Ireland, Jersey and Guernsey, the Netherlands and the UK and will soon have one with Malta. These allow people to receive super while resident overseas and overseas residents to apply for New Zealand benefits.

The agreements also allow periods of overseas residence or contributions to count as New Zealand residence for the purposes of qualifying for super, and for New Zealand residence to count as contributions and/or residence in the other country. The same rules apply to veterans’ pensions.

The moral of the story is to make sure you know the requirements. If in doubt, check before making any big decisions about where you are going to retire.

Send questions to: money@listener.co.nz

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