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).
US Social Security
US Social Security is a federal social insurance program that provides financial support to eligible individuals and their families. It was established in 1935 as part of the Social Security Act and is administered by the Social Security Administration (SSA).
To qualify for retirement benefits, individuals generally need to have worked and paid Social Security taxes for a minimum number of years (usually 10 years or 40 quarters). The benefits are based on the individual’s average lifetime earnings and the age at which they start claiming benefits.
You can take your US Social Security from age 62, but waiting until Full Retirement Age (FRA), results in a much higher benefit. FRA is based on your year of birth and is slowly rising from 66 to 67. You can also delay taking benefits until age 70.
By comparison to many developed economies, the US has a relatively low life expectancy. When this is factored in, delaying taking benefits until age 70 often results in the highest lifetime of income payable. Therefore, if you are in good health, this is often the best strategy.
In 2023, the maximum benefit at FRA is $3,627 USD per month. This is the equivalent of $43,524 USD per annum. Converted into New Zealand dollars this equates to gross income of around $70k per annum (based on a $1USD = $1.6NZD exchange rate) and therefore substantially higher than NZ Super.
Social Security benefits are subject to periodic cost-of-living adjustments to keep up with inflation and rising living costs.
Under the current US-NZ Double Taxation Agreement (DTA), US social security benefits are not taxable in NZ. However, US social security remain taxable in the US.
US citizens residing in NZ are serviced by the SSA Federal Benefits Unit (FBU) located in the US Philippines embassy in Manila. Their contact details are provided below.
Ph: (632) 301-2000 ext. 9
Fax: (632) 708-9723 and (632) 708-9714
E-mail: FBU.Manila@ssa.gov
Website: www.ssa.gov
International Comparison
A comparison of the maximum state pensions available from US, UK, New Zealand, Australia is shown 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 your 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.
