Some Russian Kiwis whose pensions have been docked for two years after being snagged in the Government’s sanctions scheme will finally get a payout from the Ministry of Social Development.
An unintended consequence of sanctions on Russia’s financial institutions means 444 Kiwis have been unable to access a portion of their pension payments for almost two years.
Those pension payments are worth a total of $1,524,708 a year (depending on the fluctuations of the Ruble), or an average of $3505 per person.
After two years of complaints to MSD, at least two of the Russian Kiwis will finally get their full entitlements, thanks to a precedent-setting tribunal decision. That case may see the remaining 442 pensioners also receive the money they’ve been missing out on.
On January 30, the Social Security Appeals Authority upheld an appeal, calling on the ministry to top up the NZ Super payments of a woman who moved from Russia about 30 years ago.
The authority ruled MSD was incorrect in continuing to enforce the abatement of her Russian pension based on the fact she was still “entitled to receive” her Russian pension money.
“As [name withheld] is not able to receive her Russian pension due to reasons well beyond her control, she is not a person affected by the receipt of an overseas pension as that term is defined in [section] 188 [of the Act],” the authority said.
The payments would be backdated to when the sanctions came into force in March 2022.
The woman’s lawyer said the decision could set a precedent for other pension cases in New Zealand.
MSD took a narrow and rigid interpretation of the law, they said.
The authority’s decision said the department should look at the law’s intention and whether that was being carried out in practice. In this case, MSD should have taken “a more generous approach” in its interpretation of the law.
The Kiwi Russian had children and was a civil engineer. She had no remaining connections in Russia and she’d always paid her taxes in New Zealand.
The fact she and her husband had been caught up in an unintended consequence of the sanctions regime for two years were considered circumstances beyond their choosing or within their control.
While the deduction amounts weren’t significant – due mostly to the devaluation of the Russian Ruble – over time it added up. In the decision, the authority noted the pensioner needed “ongoing support” to meet “a basic standard of living”.
The following day, the authority released a decision on a similar case; again ruling the person’s pension payments should not have had the Russian pension deducted, as they were unable to access that money.
MSD did not plan to appeal the authority’s two decisions. In both cases, the department would contact the Kiwis affected by the scheme, including discussing what would happen next.
Melissa Gill, the department’s deputy chief executive in charge of organisational assurance and communication, said they were currently considering whether or not the case applies more broadly – referring to the remaining 442 people who’ve been missing that portion of their pensions.
MSD did not accept the lawyer’s representation of the department’s general legal approach, Gill said.
The department considered each situation on its merits, and within the framework of what it was able to do within legislation, she said.
“In many cases we are heavily constrained by legislation. In this particular case, we considered the position very carefully, including the situation of our clients… this was an unprecedented situation that was not contemplated when the legislation was developed.”
In 2022, a Russian Kiwi spoke to Stuff about how the situation was affecting her fragile, ageing mother.
The pension was her parents’ only form of income, and over time, the missing $40 a week had impacted her mother’s financial situation.
“Her funds are diminishing – slowly but surely,” Larissa said at the time, adding that she now needed to top up her mother’s bank account.
The government’s direct deduction scheme means those who are eligible for both NZ Super and an overseas pension will have their overseas pension payments deducted from the total NZ Super amount.
In this case, 444 people who live in New Zealand are eligible for both NZ Super and at least some Russian Federation pension payments because they have lived or worked in Russia.
The scheme saves the government money in NZ Super payments – in 2020, the country saved about $450 million by deducting overseas pensions, but that amount has dropped as the Ruble has plummeted.
The issue in this case is that the portion of the pension these people usually receive from the Pension Fund of Russia is being stopped short of its transfer into New Zealand bank accounts due to the sanctions on financial institutions, including Russia’s SberBank, which carries out the wire transfers to New Zealand accounts.
Following media queries in 2022, the foreign ministry released guidance saying this was an unintended consequence and not in the spirit of the sanctions, which were introduced in response to Russia’s illegal invasion of Ukraine.
However, the guidance to New Zealand banks meant little in practice as the money is blocked long before it reaches them due to Russia’s Sberbank being removed from the international money transfer system known as SWIFT.
The only organisation with the power to ensure pensioners are not out of pocket is the Ministry for Social Development.
Note: The story has been updated to say MSD is still considering whether the remaining 442 pensioners (who have not won a legal case at the Social Security Appeal Authority) will also receive the backdated pension money.
