Date: 17 February 2011 Katrina Shanks Chairperson Social Services Committee PARLIAMENT BUILDINGS SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL Purpose 1 This paper provides the Social Services Committee with an initial briefing on the Social Assistance (Living Alone Payments) Amendment Bill (the Bill). The briefing includes: the policy intent behind the Bill an outline of the structure of the Bill sections on each amendment, setting out the context, what will change, rationale and implications of the amendments, and a clause by clause explanation of the proposed changes to the Acts concerned. Table of contents Page Introduction 2 Policy intent of the Bill 2 Amendments in the Bill 3 Replacing the living alone payment 3 Aligning the definition of a dependent child 7 Updating the reference to a boarding house 9 Appendix: Clause by clause explanation in the Order of the Bill 10 Bowen State Building, Bowen Street, PO Box 1556, Wellington Telephone 0-4-916 3300 Facsimile 0-4-918 0099
Introduction 2 The Social Assistance (Living Alone Payments) Amendment Bill amends the New Zealand Superannuation and Retirement Income Act 2001 (NZSRIA) and Part 6 of the War Pensions Act 1954 (WPA). The purpose of the proposed amendments (one policy and two technical changes) is to improve service for some recipients of New Zealand Superannuation or a Veteran s Pension (NZS/VP). 3 Payment of New Zealand Superannuation is covered by the NZSRIA, and the amendments to this principal Act are included in Part 1 of the Bill. 4 Payment of a Veteran s Pension is covered by Part 6 of the WPA, and the amendments to this principal Act are included in Part 2 of the Bill. 5 The changes proposed in this Bill will: replace the living alone payment and the two current rates of NZS/VP with a new single living alone rate of NZS/VP and a new single sharing accommodation rate of NZS/VP align the definition of a dependent child as it applies to a child aged 18 years or older, for determining eligibility to the new single living alone rate of NZS/VP, with the definition in the Social Security Act 1964 and Income Tax Act 2007 update the reference to a licensed boarding house to reflect the new definition of a boarding house in the Residential Tenancies Act 1986 (as inserted by the Residential Tenancies Amendment Act 2010). 6 The Bill sets out the commencement date as 1 April 2011. However leave was sought in the House for the commencement date to be postponed until 6 July 2011. The Departmental Report will recommend the Bill be amended to include the new date. Policy intent of the Bill 7 The main policy intent of the Bill is to reduce the compliance burden on older New Zealanders at a time of change in their living circumstances, mostly due to bereavement. It will achieve this by improving access for eligible superannuitants and veteran s pensioners who are living alone to the higher rate of payment that recognises the additional costs of living alone. Replacing the Living alone payment will ensure that single superannuitants and veteran s pensioners who are living alone do not have to make a separate application to receive their full entitlement of NZS/VP. 8 The other two amendments in the Bill are of a more technical nature: Definition of a dependent child To ensure consistency across the social assistance system for the purposes of determining when a single superannuitant or veteran s pensioner is living alone the Bill amends the definition of a dependent child Currently, a single superannuitant or veteran s pensioner is eligible to receive the living alone payment only if he or she occupies a principal place of residence of a specified kind and does not share that residence, subject to two exceptions with any other person who is 18 years or older. SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 2
The first exception is a person 18 years or older who is a dependent child; the second exception is temporary visitor who stays less than 13 weeks in any period of 26 weeks. The Bill amends the first exception to provide that a person who has a dependent child aged 18 or over living with them can receive the new single living alone rate of NZS/VP only until the end of the calendar year in which that child reaches the age of 18 years, provided that the child remains financially dependent and is attending a school or a tertiary educational establishment. Definition of a boarding house A single superannuitant or veteran s pensioner living in a boarding house is currently able to receive the living alone payment and will be eligible to receive the new single living alone rate of NZS/VP. The amendment updates the reference to a licensed boarding house to reflect the new definition of a boarding house in the Residential Tenancies Amendment Act 2010. Amendments in the Bill Replacing the Living alone payment 9 Clauses 4, 5, 6, 7, 8, 9, 10, 11, 12 & 14 relate to amendments to the New Zealand Superannuation and Retirement Income Act 2001. 10 Clauses 17, 18, 19, 20, 21, 22, 23, 24, 25 & 26 relate to amendments to Part 6 of the War Pensions Act 1954 Summary of Amendments 11 The Bill will, from 6 July 2011, replace the living alone payment supplementary benefit and the current single rates of New Zealand superannuation and veteran s pension with a: new single living alone rate of NZS/VP new single sharing accommodation rate of NZS/VP. 12 These new rates do not change the total payment of NZS/VP received by a single person living alone. Context 13 The living alone payment is a separate supplementary benefit that provides additional support to superannuitants and veteran s pensioners who are living alone. It is paid in recognition of the extra costs in maintaining a household of their own. Like NZS/VP, the living alone payment is not income or asset tested and is available to all single recipients of NZS/VP who are living alone and who make an application for it. 14 A single person who has been granted a living alone payment receives $25.56 after tax per week (based on M tax code) more than a single person who has not been granted a Living alone payment (as at 1 October 2010). SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 3
15 The following scenario outlines a situation where a recipient of NZS/VP will most benefit from the policy change. After the death of a spouse or partner, the surviving spouse or partner s rate of NZS/VP changes from a half married rate 1 to a single sharing rate 2 until such time as it is determined if they are living alone and are eligible for extra assistance. In fact, the surviving spouse or partner may now be entitled and eligible for a living alone payment. When the spouse or partner of a superannuitant or veteran s pensioner dies, a letter is sent to the recently bereaved spouse or partner inviting them to apply for additional assistance in recognition of the increased costs of living alone. Having observed that their half-married rate has increased to single sharing, some surviving spouses or partners mistakenly believe this increase is their full entitlement and do not act on the letter. Others overlook the letter. As a result, the surviving spouse or partner does not apply for the living alone payment. When the surviving spouse or partner realises they were eligible for an additional payment (such as living alone payment), they learn that applications for a living alone payment made as a result of the death of a spouse or partner can only be backdated to a maximum of 28 days before the date of application under the current legislation. In some cases spouses or partners have made this discovery some years later, and missed out on their full and correct entitlement for a considerable period of time. What will change? 16 The amendments will: provide for a single superannuitant or veteran s pensioner living alone to be entitled to receive NZS/VP at a single living alone rate without the need to separately apply. Currently, a separate application is required to receive the living alone payment because it is a separate supplementary benefit. improve access to full and correct entitlement for superannuitants and veteran s pensioners whose eligibility status is not determined within 28 days of the date of their entitlement (estimated to be 200-500 people per year). The Bill will mean that superannuitants and veteran s pensioners will be entitled to receive the single living alone rate from the date their circumstances changed and regardless of the date the Ministry of Social Development is notified of any change in living circumstances. provide transitional provisions to ensure that a person who is receiving the living alone payment immediately before the commencement of the Bill, will be entitled to receive the new single living alone rate of NZS/VP, as long as they remain living alone. 1 Each partner in a married, civil union or de facto couple where both qualify for NZS/VP receives half the married rate, which is known as half married rate. 2 Single sharing accommodation rate is the rate paid to single superannuitants or veteran s pensioners sharing accommodation, and is paid to bereaved spouses or partners on notification of the death of their spouse or partner. SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 4
Rationale 17 The living alone payment was introduced in 1990. It recognised that single superannuitants face higher living costs as they are unable to share the costs of maintaining a household. The Bill will improve access for eligible superannuitants and veteran s pensioners to the higher rate of payment of NZS/VP that recognises these additional costs. 18 The present structure of the living alone payment as a separate supplementary benefit results in some older New Zealanders not receiving their full and correct entitlement to NZS/VP. The burden of applying for a separate benefit means that some superannuitants may be suffering unnecessary financial hardship, at a time when they are grieving following the death of a spouse or partner. 19 The Bill allows a superannuitant to receive the new single living alone rate of NZS/VP effective from the day following the date that they commenced living alone. Changing the living alone payment from a separate supplementary benefit to a new rate of New Zealand Superannuation allows for review under Section 81 of the Social Security Act 1964, which provides for the correct rate to be applied from the date of the change in circumstances. This provision does not apply to assistance that is a separate benefit. Implications 20 Seventy per cent of surviving spouses are women. As such, the Bill will have positive implications for women. 21 The change is expected to have modest financial implications. The new single living alone rate may mean an estimated 200-500 people each year qualify for review under Section 81 of the Social Security Act 1964. This provision is expected to result in additional expenditure of around $76,000 $99,000 per annum, as shown in the table below. $m increase 2011/12 2012/13 2013/14 2014/15 & Outyears NZ Superannuation 0.072 0.073 0.075 0.094 Veteran s Pension 0.004 0.004 0.004 0.005 Total 0.076 0.077 0.079 0.099 Clause by clause explanation PART 1 Clause 3 Clause 4 Amendments to New Zealand Superannuation and Retirement Income Act 2001 Clause 3 provides that Part 1 amends the New Zealand Superannuation and Retirement Income Act 2001 (the principal Act in this Part). Clause 4 amends section 4(1) which is the interpretation section. The amendment inserts new definitions of living alone, single living alone rate, and single sharing accommodation rate. SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 5
Clause 5 Clause 5 inserts a new section 4A. This sets out the meaning of the term living alone for the purposes of the definition of the single living alone rate and the single sharing accommodation rate in section 4 (as amended by clause 4) New section 4A provides that a person is living alone only if he or she occupies a principal place of residence of a specified kind and does not share that residence, subject to two exceptions, with any person who is 18 years old or older. The first exception relates to the person's dependent child who is 18 years old, is not financially independent, and is attending a school or a tertiary educational establishment, and applies only until the close of 31 December in the year in which the child turned 18 years old. The second exception relates to a temporary visitor who stays with the person less than 13 weeks in any period of 26 weeks. Clause 6 Clause 6 repeals sections 13 and 14 as well as the heading above section 13. This will do away with the requirement for an application to be made for a living alone payment. This means that a single person who is living alone will be entitled to receive New Zealand superannuation at the single living alone rate without having to apply for payment at that rate. A single person who is not living alone will receive New Zealand superannuation at the single sharing accommodation rate. Clauses 7 11 Clause 12 Clause 14 Clause 15 Clauses 7 to 11 make various minor amendments to sections 16, 18, 29, and 34 and to Schedule 1 that are consequential on the changes made by Part 1. Clause 12 sets out transitional provisions. Clause 12 allows a person who is receiving a living alone payment under section 13 of the principal Act immediately before the commencement of the Bill to receive the single living alone rate of New Zealand superannuation as long as the person continues to be living alone within the meaning of section 13 of the principal Act (as it read immediately before the commencement of the Bill). Clause 14 provides that any reference to a living alone payment under the principal Act be read as a reference to the single living alone rate of New Zealand superannuation (or the difference between the single living alone rate and single sharing accommodation rate of New Zealand superannuation). Clause 15 and the Schedule provide for amendments to other Acts that are consequential on the amendments made in Part 1, including amendments to the Accident Compensation Act 2001 and Income Tax Act 2007. PART 2 Amendments to War Pensions Act 1954 Clause 16 Clause 16 provides that Part 2 amends the War Pensions Act 1954 (the principal Act in this Part). Clauses 17 24 Clauses 17 to 24 make various amendments to the War Pensions Act 1954 that largely correspond with the amendments made to the New Zealand SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 6
Superannuation and Retirement Income Act 2001 in Part 1, except that the amendments relate to the payment of a veteran s pension at the single living alone rate or the single sharing accommodation rate. Clause 25 and 26 Clause 25 and 26 set out transitional provisions. These clauses largely correspond to the transitional provisions in Part 1, Clauses 12 and 13. Aligning the Definition of a Dependent Child 22 Clauses 5 and 13 relate to amendments to the New Zealand Superannuation and Retirement Income Act 2001. 23 Clause 18 relates to amendments to Part 6 of the War Pensions Act 1954 Summary of Amendments 24 A single superannuitant or veteran s pensioner who has a dependent child living with them is currently eligible for the living alone payment, and from 6 July 2011 will be eligible for the new single living alone rate of NZS/VP. 25 The amendment will change the definition of a dependent child as it is applied to a child aged 18 years or over. This will align the definition across the social assistance system specifically with section 63A of the Social Security Act 1964 and section MC9 of the Income Tax Act 2007. Context 26 Under Section 63A of the Social Security Act 1964, where a child is aged 18 or over, not financially independent and attending a school or tertiary educational establishment, the Chief Executive has the discretion to grant or continue paying a benefit at the appropriate rate which includes the child as a dependent child of the beneficiary until the end of the calendar year in which the child reaches the age of 18 years. 27 Section MC9 of the Income Tax Act 2007 contains a similar provision where the parent of a dependent child aged 18 can be eligible for family tax credit or family assistance credit. This provision in the Income tax Act 2007 is similar in effect to the provision in the Social Security Act 1964. 28 The definition of a dependent child (as it is applied to a child aged 18 years or over) in the New Zealand Superannuation and Retirement Income Act 2001 and Part 6 of the War Pensions Act 1954 is inconsistent with the provisions relating to children who continue education in the Social Security Act 1964 and Income Tax Act 2007. 29 This inconsistency was highlighted in a recent decision of the Social Security Appeal Authority [SSAA Decision No. 38/09] which found that an adult child (ie over the age of 18 years) who was a tertiary student receiving a Student Loan but not a student allowance was a dependent child for the purposes of receiving the living alone payment. This was on the basis that the SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 7
primary care of the adult child was the appellant s responsibility, was being maintained as a member of the appellant s family and was not financially independent. 30 SSAA Decision No. 38/09 did not align with the original policy intent, which is that the treatment of a dependent child for the purposes of the New Zealand Superannuation and Veteran s Pension should be consistent with section 63A of the Social Security Act 1964. Despite this the Ministry of Social Development acted on SSAA Decision No. 38/09 and revised its operational guidelines accordingly. 31 As at February 2011, the Ministry of Social Development is not aware of any other superannuitants living with a dependant adult child that are eligible for the living alone payment. The Ministry does not anticipate many more such cases, as the situation applies only to superannuitants living with a student with no income other than a Student Loan (but not a Student Allowance). What will change? 32 The change to the definition of a dependent child will align with provisions in section 63A of the Social Security Act 1964 and section MC9(1) of the Income Tax Act 2007 setting out the circumstances in which a child aged 18 years or older can be considered a dependent child. 33 A single superannuitant who has a dependent child living with them will be able to receive the new single living alone rate of NZS/VP only until the end of the calendar year in which the child reaches the age of 18 years, provided that the child remains financially dependent and is attending secondary school or tertiary education. 34 Transitional provisions will ensure that a person who is receiving a living alone payment on the basis of the decision of SSAA Decision No. 38/09 before the commencement of the Bill, will receive the new single living alone rate of NZS/VP, providing there is no change in the person s circumstances affecting their entitlement to the living alone payment (as the legislation provided before the enactment of the Bill). This provision is likely to apply to one person only. Why the change? 35 This change will restore the operational policy that applied prior to the decision of the Social Security Appeal Authority and ensure consistency regarding the definition of a dependent child across the whole social assistance system (ie benefits paid under the Social Security Act 1964 and Working for Families tax credits paid under the Income Tax Act 2007). Clause by clause explanation PART 1 Clause 5 Amendments to New Zealand Superannuation and Retirement Income Act 2001 Clause 5 inserts a new section 4A. Subsection 4A(4) sets out the meaning of the term dependent child for the purposes of the definition of the single living alone rate and the single sharing accommodation rate in section 4 (as amended by clause 4). A person's dependent child is someone who is 18 years old, is not financially independent, and is attending a school or a tertiary educational establishment, and applies only until the close of 31 December in SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 8
the year in which the child turned 18 years old. Clause 13 Clause 13 sets out transitional provisions. It allows a person who is receiving a living alone payment under section 13 of the principal Act immediately before the commencement of the Bill on the basis of the Social Security Appeal Authority's decision reported in [2009] NZSSAA 38 (19 June 2009) to receive the single living alone rate as long as there is no change in the person's circumstances affecting the person's entitlement to the living alone payment under section 13 of the principal Act (as it read immediately before the commencement of the Bill). PART 2 Amendments to War Pensions Act 1954 Clause 18 Clause 18 inserts a new section 67A. Subsection 67A(4) sets out the meaning of the term dependent child as in Clause 5 above. Updating the Reference to a Boarding House 36 Clauses 5 relates to amendments to the New Zealand Superannuation and Retirement Income Act 2001. 37 Clause 18 relates to amendments to Part 6 of the War Pensions Act 1954 Summary of Amendments 38 A single superannuitant who is living in a boarding house is currently eligible for the living alone payment and from 6 July 2011 will be eligible for the new single living alone rate of NZS/VP. 39 From 6 July 2011, the reference to a licensed boarding house will be updated to reflect the new definition of a boarding house in the Residential Tenancies Act 1986 (as inserted by the Residential Tenancies Amendment Act 2010). Context 40 Currently, the reference to licensed boarding house in the New Zealand Superannuation and Retirement Income Act 2001 and Part 6 of the War Pensions Act 1954 is not defined in the Acts 41 When considering eligibility to the living alone payment, the policy guidelines used by the Ministry of Social Development to interpret licensed boarding house state that boarding house means a boarding house set up on a professional basis with 5 or more rooms (excluding any rooms used personally by the owner) and meals provided. What will change? 42 The Bill will ensure consistency with the new and comprehensive definition of a boarding house contained in the Residential Tenancies Act 1986 which provides that a boarding house means residential premises containing 1 or more boarding rooms along with facilities for SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 9
communal use by the tenants of the boarding house, and occupied, or intended by the landlord to be occupied by at least 6 tenants at any one time. 43 Transitional provisions will ensure that a person who is receiving the living alone payment immediately before the commencement of the Bill, will be entitled to receive the new single living alone rate of NZS/VP, as long as their circumstances have not changed. Rationale 44 The change ensures Ministry of Social Development policy is consistent with the new and comprehensive definition of a boarding house contained in the Residential Tenancies Amendment Act 2010. 45 The change also clarifies the circumstances that constitute living in a licensed boarding house for the purpose of determining eligibility to the new single living alone rate of NZS/VP. Clause by clause explanation PART 1 Clause 5 Amendments to New Zealand Superannuation and Retirement Income Act 2001 Clause 5 inserts a new section 4A. Section 4A(7) provides for the term licensed boarding house to be replaced by the term boarding house within the meaning of section 66B of the Residential Tenancies Act 1986 (as inserted by section 49 of the Residential Tenancies Amendment Act 2010). PART 2 Amendments to War Pensions Act 1954 Clause 18 Clause 18 inserts a new section 67A. Section 67A(7) provides for the term licensed boarding house to be replaced by the term boarding house within the meaning of section 66B of the Residential Tenancies Act 1986 (as inserted by section 49 of the Residential Tenancies Amendment Act 2010). SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 10
Appendix: Clause by clause explanation in the order of the Bill Clause 1 Clause 2 PART 1 Clause 3 Clause 4 Clause 5 Clause 1 is the title clause Clause 2 is the commencement clause and provides that the Bill will come into force on 1 April 2011 Amendments to New Zealand Superannuation and Retirement Income Act 2001 Clause 3 provides that Part 1 amends the New Zealand Superannuation and Retirement Income Act 2001 (the principal Act in this Part). Clause 4 amends section 4(1) which is the interpretation section. The amendment inserts new definitions of living alone, single living alone rate, and single sharing accommodation rate. Clause 5 inserts a new section 4A. This defines the term living alone for the purposes of the definition of the single living alone rate and the single sharing accommodation rate in section 4 (as amended by clause 4) New section 4A provides that a person is living alone only if he or she occupies a principal place of residence of a specified kind and does not share that residence, subject to two exceptions, with any person who is 18 years old or older. The first exception relates to the person's dependent child who is 18 years old, is not financially independent, and is attending a school or a tertiary educational establishment. However, the first exception applies only until the close of 31 December in the year in which the child turned 18 years old. The second exception relates to a temporary visitor who stays with the person less than 13 weeks in any period of 26 weeks. New section 4A also includes two technical changes: The term dependent child (as used in the new section) is given the same context as in section 63A of the Social Security Act 1964. The term licensed boarding house is replaced by the term boarding house within the meaning of section 66B of the Residential Tenancies Act 1986 (as inserted by section 49 of the Residential Tenancies Amendment Act 2010). Clause 6 Clauses 7 11 Clause 6 repeals sections 13 and 14 which will do away with the requirement for an application to be made for a living alone payment. This means that a single person who is living alone will be entitled to receive New Zealand Superannuation at the single living alone rate without having to apply for payment at that rate. A single person who is not living alone will receive New Zealand superannuation at the single sharing accommodation rate. Clauses 7 to 11 make various minor amendments to sections 16, 18, 29, and SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 11
34 and to Schedule 1 that are consequential on the changes made by Part 1. Clause 12 and 13 Clause 14 Clause 15 Clause 12 and 13 set out transitional provisions. Clause 12 allows a person who is receiving a living alone payment under section 13 of the principal Act immediately before the commencement of the Bill to receive the single living alone rate of New Zealand superannuation as long as the person continues to be living alone within the meaning of section 13 of the principal Act (as it read immediately before the commencement of the Bill). Clause 13 allows a person who is receiving a living alone payment under section 13 of the principal Act immediately before the commencement of the Bill on the basis of the Social Security Appeal Authority's decision reported in [2009] NZSSAA 38 (19 June 2009) to receive the single living alone rate as long as there is no change in the person's circumstances affecting the person's entitlement to the living alone payment under section 13 of the principal Act (as it read immediately before the commencement of the Bill). Clause 14 provides that any reference to a living alone payment under the principal Act be read as a reference to the single living alone rate of New Zealand superannuation (or the difference between the single living alone rate and single sharing accommodation rate of New Zealand superannuation). Clause 15 and the Schedule provide for amendments to other Acts that are consequential on the amendments made in Part 1, including amendments to the Accident Compensation Act 2001 and Income Tax Act 2007. PART 2 Amendments to War Pensions Act 1954 Clause 16 Clause 16 provides that Part 2 amends the War Pensions Act 1954 (the principal Act in this Part). Clauses 17 24 Clauses 17 to 24 make various amendments to the War Pensions Act 1954 that largely correspond with the amendments made to the New Zealand Superannuation and Retirement Income Act 2001 in Part 1, except that the amendments relate to the payment of a veteran s pension at the single living alone rate or the single sharing accommodation rate. Clause 25 and 26 Clause 25 and 26 set out transitional provisions. These clauses largely correspond to the transitional provisions in Part 1, Clauses 12 and 13. File Reference : A5316556 SOCIAL ASSISTANCE (LIVING ALONE PAYMENTS) AMENDMENT BILL: INITIAL BRIEFING 12