The Retirement Commissioner says seniors stuck overseas due to the lack of MIQ spots should get an added six months before their pensions are stopped and they're fined.
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It comes as some older New Zealanders approach their 30th week abroad, which as it stands means they'll stop getting their payments if they don't come home.
They're among the more than 25,000 New Zealanders around the world who tried to secure one of just 3700 MIQ spaces that became available in the latest lottery.
You don't have to look far on the Facebook groups for Kiwis stuck abroad to find retirees who now risk having their incomes cut and being hit with fines for thousands of dollars.
Under the law, a person is entitled to the first 26 weeks of their normal rate of superannuation while overseas, provided they return to New Zealand within 30 weeks. If they don't, they're required to pay back the previous six months of their superannuation.
Retirement Commissioner Jane Wrightson said while this policy is understandable in ordinary times, the extraordinary situations people now find themselves in means the policy is unsympathetic.
"This has come to a head during the opening and closing of the travel bubble in June and July. We have a number of pensioners who travelled overseas when the bubble was open, mostly to visit family and to provide assistance, I haven't found very many who were actually going on holiday, they were going over to provide support, with no expectation that the bubble would close for such a long time.
"The risk they took was travelling, of course, but the bubble was never intended, I think, to go this long and the difficulty in getting in through MIQ is a new problem."
She's been speaking with a number of retired Kiwis who are stuck overseas and say they are distressed.
"They can't afford to lose their income and so what we have is a situation where we have an inadequate policy being applied without deep thought and this is a great concern to me."
Last week, the Retirement Commissioner wrote to the Ministry of Social Development and asked them to reconsider their approach.
"I think MSD has discretion to apply a different set of rules. What I'd like to see is for instance, that the people who are genuinely trying to get home, who can provide evidence of trying to get into MIQ, for instance, and that they get another six-month waiver on any penalty, be that stopping their pension and certainly not demanding repayments."
One retiree who faces losing her pension is Nanette Boyd-Dunlop from Napier.
She and her husband travelled to Melbourne in June to look after their daughter, who had to undergo major surgery.
But then the bubble burst and now, almost four months later, they're stuck and unable to get a spot in MIQ to get home.
"We never thought about our pension at that time because we had plenty of time and then I started hearing things about it being cancelled and I thought that couldn't possibly be true. I knew it only lasted a certain length of time under normal circumstances, but this is not normal, this is far from normal."
They have tried their luck with the MIQ lottery, but so far it hasn't gone well.
If they can't get home before the end of December, they will have no income and will have to pay the last six months of their superannuation back.
She feels fortunate to be able to stay with family, but said the situation is far from ideal and is causing sleepless nights and huge amounts of stress.
"I feel we've actually been totally forgotten and ignored. Having our pension cut is not acceptable. There should be some sort of amnesty for people like us."
In a statement, the Ministry of Social Development said they appreciate the difficult circumstances some superannuitants in Australia are facing following the closure of the quarantine-free travel bubble and have been continually monitoring their situation.
"Our ability to pay pensions to overseas New Zealanders beyond 26 weeks is only permitted under certain circumstances, as defined in the New Zealand Superannuation and Retirement Income Act 2001 (NZSRIA).
"We are continuing to assess the situation with regard to MIQ capacity and whether people who travelled during the quarantine-free period could have reasonably foreseen the difficulty in returning before their temporary absence period expired."
The Ministry of Social Development said they have been in touch with the Retirement Commissioner.
