New Zealand Super
New Zealand Superannuation (often referred to as just NZ Super) is a state pension paid by the New Zealand government to all eligible persons.
It is an age-related universal pension paid without any means testing (asset or income) and paid for life by the New Zealand Government.
The income is taxable with the after-tax weekly rate for a couple currently set each year on 1 April at 66% of the net average after-tax (ordinary time) wage, and the rate for a single person living alone is set at 66% of this married couple rate.
Upon reaching age 65 and providing you are a New Zealand citizen or permanent resident who normally lives here at the time of applying, you may be eligible for NZ Super. To qualify you must have also lived in New Zealand (or a country New Zealand has a social security agreement with) for a total of 10 years since you turned 20 (5 of those years must be since you turned 50). Special eligibility conditions apply to Australian citizens.
In November 2021, the New Zealand Government passed a bill that means that, over time, individuals will have to have lived longer in New Zealand before they qualify for NZ Super.
Currently, individuals need to have lived in New Zealand for at least ten years after age 20 to qualify. However, starting in July 2024, this residency period will gradually increase to 20 years by July 2042. Individuals will still need to have lived in New Zealand for at least five years since they turned 50.
As of the 2023-24 tax year the rates of NZ Super are as follows:
| New Zealand Superannuation – Annual Rates from 1 April 2023 |
Gross | Net* |
| Single living alone | $30,091 | $25,811 |
| Couple – only one qualifies (and the other is excluded) | $22,869 | $19,854 |
| Couple – both qualify | $45,738 | $39,708 |
| * Assuming no other taxable income | ||
Direct Deduction Policy (DDP) for Overseas Government Pensions
As part of New Zealand’s superannuation rules any foreign government pension entitlements will be subject to a Direct Deduction up to the value of NZ Super.
If an individual is entitled to an overseas pension that is of the same nature as NZ Super (administered by a government and covering the same sort of circumstances), then under the DDP, the gross amount of this overseas pension entitlement will be deducted from your gross NZ Super entitlement.
Deferment of overseas pensions does not avoid the DDP, and all reasonable steps must be taken to obtain any overseas pensions entitlements, even if the actual receipt of these entitlements is deferred for other reasons (maximise benefits, minimise tax etc).
UK State Pension
The UK state pension is a government-funded pension scheme that provides retirement income to eligible individuals who have reached the state pension age.
The state pension system aims to provide a basic level of income for retirees. It is not means or asset tested and is available to all eligible individuals.
The state pension age is the age at which individuals become eligible to claim the state pension is currently 66 but is gradually increasing to 68 for those born on or after 5 April 1977.
To be eligible for the full state pension, individuals need to have accrued a certain number of ‘qualifying years’ of National Insurance contributions or credits. Qualifying years are the years in which you paid National Insurance contributions or received credits (e.g., due to unemployment or caring responsibilities).
To receive the full state pension, individuals typically need to have at least 35 qualifying years. If you have fewer than 35 qualifying years, your state pension amount will be reduced proportionally. If you have more than 35 qualifying years, the additional years do not increase the pension amount further.
For the tax year 2023/2024, the full state pension was £203.85 per week. This is the equivalent of £10.5k per year or around $21k NZD gross per year (assuming a £1GBP to $2NZD exchange rate).
If you are living in New Zealand, your UK state pension payments are ‘frozen’, meaning that you will not be entitled to any inflation adjustment, which will erode the value of your benefits over time.
In many cases the income from the UK State Pension will be lower than the NZ Super. In which case you will be entitled to a top up by the NZ Government, assuming you meet the NZ eligibility criteria. If don’t qualify for NZ Super at age 65, you can still claim your UK pension, and then make a claim for NZ Super at a later time when you meet the NZ residency requirements.
For the latest information and to request a statement of benefits please check the UK government’s website https://www.gov.uk/new-state-pension
Additional information on the payment of UK pensions is also available online from New Zealand’s work and income website https://www.workandincome.govt.nz/
International Comparison
A comparison of the maximum state pensions available from the UK, New Zealand, Australia and US is provided below. Whilst UK, New Zealand and Australia provide similar benefits, the US is the standout with the potential to provide a much higher level of benefits (based on an individual’s earnings and social security record).
Notes: Details as of August 2023. Chart shows the maximum benefits for a single person living with another person. All figures are in NZD and before the deduction of tax.
More information and Professional Advice
Seeking professional advice from a tax expert with knowledge of both New Zealand’s tax laws, your home country’s tax regulations and the impact of these agreements, is highly recommended to ensure compliance and ensure you organise your affairs efficiently.
You can find more information on New Zealand’s tax system, including a range of tax guides can be found from New Zealand’s Inland Revenue Service (IRD) www.ird.govt.nz.
Please note that the information contained in this note is general in nature and should not be considered as individual advice. If you would like to discuss your individual situation with an adviser, or have any questions, please contact a member of the Pacific Wealth team.
