FOUNTAIN v THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT [2017] NZHC 2144

FOUNTAIN v THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT [2017] NZHC 2144 [5 September 2017]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2016-485-590[2017] NZHC 2144IN THE MATTER OF an appeal by way of case stated from thedetermination of the Social SecurityAppeal Authority at Wellington unders 12Q of the Social Security Act 1964BETWEEN JOHN FOUNTAINAppellantAND THE CHIEF EXECUTIVE OF THEMINISTRY OF SOCIALDEVELOPMENTRespondentHearing: 22 February 2017Counsel: Appellant in person, with R Latimer as McKenzie FriendO Upperton and M Conway for RespondentJudgment: 5 September 2017JUDGMENT OF CLIFFORD JIntroduction[1] The appellant, John Fountain, immigrated to New Zealand in 1975. Mr Fountain had previously lived in Canada. He was granted New Zealand Superannuation (NZS) from 27 October 2011.[2] Section 70 of the Social Security Act 1964 (the Act) essentially provides for New Zealand Superannuation payments to be reduced where the recipient receives a like benefit from overseas. Mr Fountain was subsequently required to test his eligibility for a Canadian pension. He was granted the Canadian Old Age Security pension (the OAS) and the Canada Pension Plan pension. The respondent, the Chief Executive of the Ministry of Social Development (the Chief Executive), thenreviewed Mr Fountain's entitlement to NZS. As a result, OAS and Canadian Pension Plan payments Mr Fountain receives from Canada have been deducted from NZS since 15 November 2013 and 1 October 2014 respectively.[3] Mr Fountain challenged the Chief Executive's decision to deduct those OASand Canadian Pension Plan payments (hereafter together "the CPP"). He did sobefore a Benefits Review Committee. That Committee upheld the Chief Executive'sdecision. Mr Fountain appealed to the Social Security Appeal Authority (the Authority). The Authority also held Mr Fountain's CPP payments are deductiblefrom his NZS under s 70 of the Act.1 It did so because:2(a) The CPP is part of a programme providing for a contingency outlinedin New Zealand's programme for income support, namely oldage/retirement.(b) The CPP is administered by or on behalf of the Government of Canada.[4] Mr Fountain considers those conclusions to be wrong in law. He has appealed accordingly under s 12Q of the Act. The Authority stated the following question of law:Did the Authority err in law in determining that the Canada Pension Planpayments received by the appellant must be deducted from the appellant'sentitlement to New Zealand Superannuation pursuant to s 70 of the Social Security Act 1964?[5] Mr Fountain identifies some five sub-questions or issues which, by reference to the text of s 70 itself, he sees as coming within that general question of law. The Chief Executive accepts those five sub-questions of law are captured by the question stated by the Authority. I consider this appeal accordingly.1 Fountain v Chief Executive of the Ministry of Social Development [2015] NZSSAA 103.2 At [38].The legal context[6] This Court has, on a number of occasions, considered the applicability of s 70 to payments from overseas Government pension schemes to persons receiving NZS.3In all of those cases, the Court has decided that the Chief Executive acted correctly in deciding that s 70 required the relevant overseas pension payments to be deducted from NZS. In two of those cases,4 this Court specifically held that CPP payments are properly deductible from NZS payments pursuant to s 70 of the Act. Mr Fountain was well aware of that weight of authority against him. He therefore based this appeal on an interpretation of the requirements of s 70 — reflected in his five sub-questions of law — which he said showed that the Authority's decision was,notwithstanding that authority, in error. Given that background, and beforeconsidering the Authority's decision and Mr Fountain's challenge, it is helpful torecord the terms of the s 70, and how that section has been interpreted and applied by this Court when others have challenged like decisions of the Authority.The statutory provision[7] Section 70 of the Act provides for the rate of New Zealand benefits if an overseas benefit is payable. This applies to a variety of benefits including NZS (paid under the New Zealand Superannuation and Retirement Income Act 2001) and means the amount of NZS a pensioner is entitled to receive will be reduced by the amount of the overseas pension they receive. Section 70, as relevant, provides:70 Rate of benefits if overseas pension payable(1) For the purposes of this Act, if—(a) any person qualified to receive a benefit under this Act orPart 6 of the Veterans' Support Act 2014 or under theNew Zealand Superannuation and Retirement Income Act3 From the United Kingdom: Dunn v Chief Executive of the Ministry of Social Development[2008] NZAR 267 (HC), upheld on appeal in Dunn v Chief Executive of the Ministry of Social Development [2008] NZCA 436, [2009] NZAR 94. From the United States: Roe v Social Security Commission HC Wellington M70/86, 10 April 1987. From Canada: Hogan v Chief Executive of the Department of Work and Income New Zealand HC Wellington AP49/02, 26 August 2002; Latimer v Chief Executive of the Ministry of Social Development [2015] NZHC 2779; and Horn v Chief Executive of the Ministry of Social Development HC Wellington CIV- 2010-485-1589, 15 November 2010. From Ireland: Tetley-Jones v Chief Executive of the Department of Work and Income (2004) 1 NZSC 40,645 (HC).4 Hogan v Chief Executive of the Department of Work and Income New Zealand, above n 3; andHorn v Chief Executive of the Ministry of Social Development, above n 3.2001 is entitled to receive or receives, in respect of thatperson or of that person's spouse or partner or of that person's dependants, or if that person's spouse or partner or any of that person's dependants is entitled to receive orreceives, a benefit, pension, or periodical allowance granted elsewhere than in New Zealand; and(b) the benefit, pension, or periodical allowance, or any part of it, is in the nature of a payment which, in the opinion of the chief executive, forms part of a programme providing benefits, pensions, or periodical allowances for any of the contingencies for which benefits, pensions, or allowances may be paid under this Act or under the New Zealand Superannuation and Retirement Income Act 2001 or underthe Veterans' Support Act 2014 which is administered by or on behalf of the Government of the country from which the benefit, pension, or periodical allowance is received—the rate of the benefit or benefits that would otherwise be payableunder this Act or Part 6 of the Veterans' Support Act 2014 or underthe New Zealand Superannuation and Retirement Income Act 2001 shall, subject to subsection (3), be reduced by the amount of such overseas benefit, pension, or periodical allowance, or part thereof, as the case may be, being an amount determined by the chief executive in accordance with regulations made under this Act:Case law[8] On appeal to this Court, the Chief Executive adopted the following summary by Kós J in Boljevic v Chief Executive of the Ministry of Social Development, the most recent case, of the two requirements for an overseas pension to be subject to s 70:5[17] Section 70 therefore provides that an overseas pension must be deducted from New Zealand Superannuation, if (1) the nature of thepayment (in the Chief Executive's opinion) forms part of a programme providing pensions for any of the contingencies for which pensions may be paid under New Zealand Superannuation, and (2) is administered by or on behalf of the Government of the overseas country.[9] In addition, the Chief Executive pointed to case authority to the following general effect:65 Boljevic v Chief Executive of the Ministry of Social Development, [2012] NZAR 280 (HC).6 On comparison of the contingencies: Tetley-Jones v Chief Executive of the Department of Work and Income, above n 3, at [46]; and Hogan v Chief Executive of the Department of Work and Income New Zealand, above n 3, at [24]. On source: Hogan v Chief Executive of the Department of Work and Income New Zealand, above n 3, at [26]; Dunn v Chief Executive of the Ministry of Social Development, above n 3, at [39]; and Boljevic v Chief Executive of the Ministry of Social Development, above n 5, at [34].(a) A specific comparison of the contingencies (including whether or not they are contribution based) is not required. It is enough that the overseas program provides for one or more of the contingencies for which New Zealand legislation provides.(b) The source of the pension is irrelevant. It is enough that the pension is administered by or on behalf of the government.[10] As regards the CPP itself, the Chief Executive adopted the following description from Latimer v Chief Executive of Ministry of Social Development:7[4] The CPP was established by the Canada Pension Plan Act RSC 1985 c C-8. It is a compulsory scheme for all people working in Canada outside the province of Quebec which has its own, similar plan. CPP is funded by worker and employer contributions based on earnings. Neither the Canadian Government, nor the Governments of the provinces of Canada, contribute to the CPP except in their roles as employers.[5] Contributions to the CPP are collected by the Canada RevenueAgency, a Government department similar to New Zealand's Inland RevenueDepartment. These funds are paid into the Canadian Consolidated Revenue Fund and credited to the Canadian Pension Plan Account. Any amounts that exceed the immediate obligations of the Account are transferred to the Canada Pension Plan Investment Board, which manages the fund. The directors and chairperson of the Canada Pension Plan Investment Board are appointed by, and accountable to, the Canadian Government.[6] Under ss 92 and 117 of the Canada Pension Plan Act, the Ministersof Social Development and National Revenue have "control and direction of the administration of the Act", and must report to the Canadian Parliamenton the administration of the Act. There is also provision for the Minister of Finance to review the financial state of the CPP and make recommendations on the benefits and contribution rates provided by it pursuant to s 113 of the Canada Pension Plan Act.[7] Service Canada, a Canadian Government agency, administers the CPP. It is responsible for functions such as managing applications for CPP benefits.(Footnotes omitted.)[11] The Chief Executive also supported the Authority's decision by reference toCanada-specific authority in the following terms:87 Latimer v Chief Executive of Ministry of Social Development, above n 3.8 Citing Hogan v Chief Executive of the Department of Work and Income, above n 3; Latimer v Chief Executive of the Ministry of Social Development, above n 3; and Horn v Chief Executive of the Ministry of Social Development, above n 3.The High Court in Hogan and Latimer held that CPP is administered by the Canadian government. In Latimer, Edwards J specifically noted "[t]he factthat the investment of the fund is managed by an independent board does not change the fact that the payment of the benefits is managed by theGovernment".The High Court in Horn held the Quebec Pension Plan, the equivalent of CPP, also satisfies the administration test. Mallon J affirmed the Hogandecision, noting it would be illogical if CPP was deducted but the Quebec Pension Plan was not — the reverse must also be true.(Footnotes omitted.)Analysis[12] Mr Fountain's appeal can be considered as having two parts. First, his corecomplaint based on the fact that the CPP is a contributory scheme and the failure of the Chief Executive to recognise that. Secondly, the number of other ways the Chief Executive erred in applying s 70 in his case. I will consider the appeal on that basis.Mr Fountain's core complaint[13] In Boljevic Kós J summarised the Boljevic's appeal in the following terms:9The Boljevics say that the Croatian pension payments are the outputs of a contributory scheme — like Kiwisaver. Kiwisaver outputs are not deducted from New Zealand Superannuation. Nor, say the Boljevics, should the Croatian payments be.[14] Although Mr Fountain organised his appeal around his five sub-questions, a similar contention was also very much the overall flavour of his appeal. That is, the CPP was a contributory scheme, and his entitlements under the scheme were private, and transferable, property interests. Those entitlements were related, at least in part, to the contributions he had made over time. Therefore, why should those contribution-based entitlements be abated from NZS, which was in New Zealand auniversal benefit (albeit taxed at the recipient's marginal tax rate)? It was wrong forthe Authority to approach the question of the applicability of s 70 to Mr Fountain'sCPP entitlements on the basis that it was not relevant that Mr Fountain himself had contributed personally to gain entitlement to those benefits.9 Boljevic v Chief Executive of the Ministry of Social Development, above n 5, at [13].[15] At the hearing of this appeal, and whilst also recognising the weight of authority in this Court against Mr Fountain, I expressed some attraction to that argument. In particular, I noted reservations with the conclusion reached in all the cases so far that, for the purposes of s 70, there was no distinction to be drawn between contributory and non-contributory schemes. That initial reaction was based, in the New Zealand context, on the relatively recent development of KiwiSaver. KiwiSaver is, after all, a contributory scheme, subsidised (to a limited extent) by the Government and, in terms of its overall arrangements, supported by legislation (KiwiSaver Act 2006).[16] The purpose of that Act reflects the Government's public policy objectives inproviding the KiwiSaver scheme:3 Purpose(1) The purpose of this Act is to encourage a long-term savings habit and asset accumulation by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement. The Act aims to increase individuals' well-being and financial independence, particularly in retirement, and to provide retirement benefits.(2) To that end, this Act provides for schemes (KiwiSaver schemes) tofacilitate individuals' savings, principally through the workplace.[17] There is a degree of legislative underpinning for the operation of the scheme. Thus, pursuant to s 10, new employees automatically become members of a scheme, although they may — subject to time limits — opt out. The Commissioner of Inland Revenue is involved in the administration of the scheme. But, as already noted, NZS is not abated by reference to KiwiSaver benefits. This caused me to question the universality of the proposition that nothing turned on whether the relevant overseas scheme was contributory or non-contributory in the context of s 70.[18] The answer to my concerns can, I now realise, be found in one aspect of the legislative history which has been cited by this Court on several occasions, including in one of the cases which found that CCP payments did abate NZS pursuant to s 70.That case is the decision of Ellen France J in Hogan v Chief Executive of the Department of Work and Income New Zealand.10[19] Like Mr Fountain, Mr Hogan was in receipt of the CPP, including — as here— the OAS. In reliance on one of the early cases considering s 70, Roe v Social Security Commission,11 the Authority concluded that the Canadian scheme met the criteria for abatement of Mr Hogan's NZS. On appeal Mr Hogan, as does Mr Fountain, said that the Authority erred in regarding the source of funds as irrelevant. Ellen France J addressed that aspect of Mr Hogan's argument in thefollowing terms:[26] Perhaps the strongest argument for the appellant that Roe is wrong as to the effect of the source of funds is in his submission as to the purpose of s 70. Namely, he says that the intention of s 70 is to prevent an individual from collecting twice from government funds, whereas under the CPP the appellant is simply recouping his/his employer's own contribution. In the end, however, I accept the respondent's submission that it is not necessary in terms of s 70 to conduct an inquiry as to how the relevant Government collects the funds and particularly whether they are from taxation or fromanother type of compulsory acquisition from a person's income which theGovernment chooses not to call taxation. True private savings schemes will not be caught by s 70 as a programme administered by the Government will not pay them.[20] As can be seen, the conclusion that the source of the contribution is irrelevant is to be understood in the context of schemes made compulsory by Government legislation: that is, where contributions, being compulsory, are seen as a "type of compulsory acquisition from a person's income which the Government chooses not to call taxation". That characterisation of overseas schemes affected by s 70 is based on the 1972 report of the Royal Commission of Inquiry entitled Social Security in New Zealand.12 At the time, s 70 provided for the discretionary deduction of overseas pensions, without direction as to how that discretion was to be exercised. The Royal Commission recommended that s 70 should be amended by providing that the discretion should be exercised on the basis of whether or not an overseas10 Hogan v Chief Executive of the Department of Work and Income New Zealand, above n 3.11 Roe v Social Security Commission, above n 3.12 Royal Commission of Inquiry Social Security in New Zealand (AR Shearer, Government Printer, March 1972).pension or benefit was analogous to a New Zealand benefit.13 In reaching that conclusion, the Royal Commission reasoned:14In respect of New Zealand income-tested benefits we are in no doubt that the present policy is the proper one. If the overseas pension is analogous — as it would be, for example, if it derived from a compulsory State scheme — then only one, the New Zealand benefit or the overseas pension can be received. Otherwise the overseas pensioner would be in a better position than the life-long New Zealand, at the latter's expense.Nor are we in any doubt in respect of the New Zealand superannuation benefit, provided again that the overseas pension is analogous to a New Zealand benefit. It is true that our superannuation benefit is paid irrespective of other income, but it is also true that no one can receive both the superannuation benefit and an age, widows or invalids, or any other income-tested benefit. The overseas pensioner should not be placed in a better position.Thus it is clear that a person cannot receive both a New Zealand benefit and an overseas pension which is analogous to it, or to another New Zealand benefit which a New Zealander could not receive at the same time.For a pension to be analogous to a benefit they need not be similar in every way. The analogy is not destroyed because one is financed by specific contribution and the other by taxation. Specific contributions to a compulsory State scheme are analogous to taxation, but contributions to an occupational superannuation scheme are not, even though they may be compulsory for employees of a particular enterprise.[21] That feature of "contributions to a compulsory state scheme" has beenpresent in all of the employer/employee funded pension schemes whose payments have been held to abate NZS under s 70.15 It is that element of compulsion by the Government which explains why the source of contribution is, where the other s 70 criteria are satisfied, irrelevant.13 At 358.14 At 358.15 From the United Kingdom: Dunn v Chief Executive of the Ministry of Social Development,above n 3, at [3] — "the contributions he made were compulsory". From the United States: Roe v Social Security Commission, above n 3, at 3 — "their contributions, and those of their respective employers, were compulsory". From Canada: Hogan v Chief Executive of the Department of Work and Income New Zealand, above n 3, at [7] — "contributions to the scheme are compulsory"; Latimer v Chief Executive of the Ministry of Social Development, above n 3, at [4] — "the CPP is a compulsory scheme"; and Horn v Chief Executive of the Ministry of Social Development, above n 3, at [10] — "the CPP is a compulsory scheme funded by employee and employer contributions". From Ireland: Tetley-Jones v Chief Executive of the Department of Work and Income, above n 3, at [7] — "the Fund obtains its money from acombination of compulsory employment contributions, self-employed contributions, voluntarycontributions ".[22] I am therefore satisfied that there was no error in the Authority's approach tothe question of Mr Fountain's contributions when applying the deductibility regimeof s 70.[23] Against that background, and given in particular the comprehensive and carefully reasoned decisions of this Court in Horn v Chief Executive of the Ministry of Social Development and Hogan on which the Authority relied in declining Mr Fountain's appeal, the remaining issues can be dealt with reasonably succinctly.The Chief Executive's other errorsThe elements of s 70 — an error of law?[24] In its decision, the Authority characterised the essential elements of s 70 as being:16(a) the recipient of a benefit in New Zealand (or his spouse or partner or dependent) receives a benefit or pension or periodical allowances granted overseas, which forms part of a programme providing benefits, pensions or periodical allowances; and(b) the programme provides for any of the contingencies for which benefits, pensions or periodical allowances may be made under the Social Security Act 1964, the New Zealand Superannuation andRetirement Income Act 2001 or the Veteran's Support Act 2014; and(c) the overseas programme is administered by or on behalf of the Government of the country from which the benefit, pension or periodical allowance is received.[25] That characterisation, Mr Fountain argued, over-simplified the position, and meant the Authority had not properly considered the application of s 70 in his case. Rather than those three elements, there were in fact six. That argument is best16 Fountain v Chief Executive of the Ministry of Social Development, above n 1, at [6].understood by reference to the way Mr Fountain expressed it in his written submissions:C1 The Benefit being received by the qualifying person must begranted elsewhere than in NZ.C2 That C1-Benefit must be "in the nature of a payment" of a particular kind.What sort of payment?C3 the sort of payment that forms part of a programme providingBenefits for contingencies.What sort of contingencies?C4 any of the contingencies for which Benefits may be paid under the Social Security Act or the NZSRI Act or the Vet Act.What sort of programme should the payment (C3) be part of?C5 a programme thatC5.1 is administered by-or-on-behalf-of the Government of the Country;ANDC5.2 which provides Benefits for any of the contingencies thatmay be paid for under the Social Security Act or the NZSRI Act or the Vet Act.What Government?C6 The Government from which the C1 and C2 Benefit is received.[26] When s 70 was properly understood in that way, Mr Fountain submitted that the Authority had failed to consider what Mr Fountain called issues C1, C2 and C6. That was itself an error of law.[27] It is possible to rephrase the requirements of s 70 as Mr Fountain did. But, ascan be immediately seen, the Authority's tripartite characterisation of therequirements of s 70 contains each of those six elements. The substantive question remains whether — by reference to its three part analysis — the Authority considered each of the necessary elements. There will be no error of law if it did.The Authority's analysis of the CPP — four further errors of law[28] Mr Fountain then argued that the Authority's analysis of the CPP was wrongon four further counts. That is:(a) The Authority erred in law in determining that the CPP programmewas one "which is administered by or on behalf of the Government of the country from which the benefit, pension, or periodical allowanceis received".(b) The Authority was wrong in concluding that the contingencies for which the CPP was paid were equivalent to the contingencies for which NZS was paid.(c) As the CPP was, as Mr Fountain put it "self funding", the Authoritywas wrong in concluding that CPP payments were received by him from the Government of Canada.(d) The Authority was wrong in using the phrase "income support" indetermining the equivalence of the contingencies for which NZS and CPP were paid. Rather, the NZS was a programme which provided social welfare benefits, whereas the CPP was not.[29] In making those arguments, Mr Fountain placed particular reliance on the role played by the Canada Pension Plan Investment Board (the CPPIB) in the scheme of the CPP, on the contributions required for an entitlement to CPP to arise and on the nature of CPP benefits (namely pension credits which constitute a type of longevity insurance and, therefore, the value of which is exposed to the risk of a statistically premature death).[30] The CPP is but one aspect of the Canadian retirement pension scheme. The scheme also comprises the OAS, and the Guaranteed Income Supplement (GIS). The OAS provides a modest monthly pension for all persons over 65 years, provided they meet certain residential requirements. The GIS provides a monthly benefit to OAS recipients who have a low income and are living in Canada. Other parts ofCanada's retirement system are private pensions, either employer sponsored or from tax deferred individual savings (Registered Retired Savings Plans).Analysis of the CPP[31] In my view, and based on the materials provided to me for the purposes of this appeal, the summary in Latimer (set out above) is an accurate description of the CPP and, with the exception perhaps of the equivalence of contingencies issue, supports the conclusions the Authority reached. Mr Fountain may of course say that the decision in Latimer simply represents an earlier instance of themisunderstandings that featured in the Authority's decision on his appeal. In myview, the Annual Report of the Canada Pension Plan 2014-2015 confirms that is not the case.17 That report is addressed to the Governor-General of Canada and laid before the Canadian Parliament by the responsible ministers, being the Minister of Finance and Minister of Families, Children and Social Development. At various points the report explains the background to, and nature and operation of, the CPP and, within that, the role of the Government and the CPPIB.[32] As set out below, those explanations confirm that the Authority did not err in reaching the conclusion Mr Fountain challenges.Administered by or on behalf of the Government?[33] As to administration of the CPP, the report describes how:18Most employees in Canada over the age of 18 contribute either to the CPP or to its sister plan, the Quebec Pension Plan (QPP).The CPP is managed jointly by the federal and provincial governments. Quebec manages and administers its own comparable plan, the QPP, and participates in decision-making for the CPP. Benefits from either plan are based on pension credits accumulated under both plans.As joint stewards of the CPP, the federal and provincial Ministers of Financereview the CPP's financial state every three years and makerecommendations as to whether benefits and/or contribution rates should be changed. They base their recommendations on a number of factors,17 Annual Report of the Canada Pension Plan 2014-2015 (Government of Canada, 2015).18 At 249 and 258.including the results of an examination of the CPP by the Chief Actuary. The Chief Actuary is required under the legislation to produce an actuarial report on the CPP every three years (in the first year of the legislated ministerial triennial review of the Plan). The CPP legislation also provides that upon request of the Minister of Finance, the Chief Actuary prepares an actuarial report any time a bill is introduced in the House of Commons that has, in the view of the Chief Actuary, a material impact on the estimates in the most recent triennial actuarial report. This reporting ensures that the long-term financial implications of proposed Plan changes are given timely consideration by the Ministers of Finance.[34] Those, and many other extracts from that report, confirm that the CPP is administered by or on behalf of the Government of Canada. That the Government of Canada is both Federal and Provincial, and that both levels play a role in the management and administration of the CPP, only confirms that conclusion.Equivalent contingencies[35] As to contingencies, the report states:19While many Canadians associate the CPP with retirement pensions, the CPPalso provides disability, death, survivor, children's and post-retirement benefits. The CPP administers the largest long-term disability plan in Canada. It pays monthly benefits to eligible contributors with a disability and also to their children, helps some beneficiaries return to the workforce through vocational rehabilitation services and offers return-to-work support.To begin receiving a retirement pension, the applicant must have made at least one valid contribution to the Plan and must have reached the age of 60.Retirement pensions represent nearly 77 percent ($29.6 billion) of the total benefit amount paid out ($38.7 billion) by the CPP in 2014–2015. Theamount of contributors' pensions depends on how much and for how longthey have contributed and at what age they begin to receive the benefits. In 2015, the maximum monthly retirement pension at age 65 was $1,065. The average payment in 2014–2015 was $543.05.Canadians are living longer and healthier lives, and the transition from work to retirement is increasingly diverse. The CPP offers flexibility for older workers who are making the transition to retirement.CPP contributors can choose the right time for their retirement pension based on their individual circumstances and needs. Contributors have the flexibility to take their retirement pension earlier or later than the normal age19 At 250-252.of 65. In order to ensure fair treatment of contributors and beneficiaries, those who take their retirement pension after age 65 receive a higher amount. This adjustment reflects the fact that these beneficiaries will, on average, make contributions to the CPP for a longer period of time but receive their benefit for a shorter period of time. Conversely, those who take their retirement pension before age 65 receive a reduced amount, reflecting the fact that they will, on average, make contributions to the CPP for a shorter period of time but receive their benefit for a longer period of time.[36] NZS and the CPP can be distinguished: the former is a universal benefit, whilst the latter is a benefit for employed persons who have retired. But, from the perspective of employed persons, NZS and the CPP both protect against the contingency of loss of income following retirement. Mr Fountain also drew adistinction between the CPP's role as providing retirement benefits, and that of theNZS as constituting social welfare. Again, there may be something in that distinction, given the universal nature of superannuation and, subject to application, the entitlement to NZS payments irrespective of work history. But from the perspective of the working taxpayers whose tax payments support the pay as you go aspects of NZS, NZS is a benefit they supported during their working lives providing an entitlement to its receipt in their retirement.[37] The preamble to the Old-age Pensions Act 1898 captures much of the same proposition:20WHEREAS it is equitable that deserving persons who during the prime of life have helped to bear the public burdens of the colony by the payment of taxes, and to open up its resources by their labour and skill, should receive from the colony a pension in their old age:[38] In terms of s 70, the CPP is, therefore, in the nature of a payment which forms part of a programme providing pensions for the contingency of loss of income following retirement, which is a contingency for which NZS is paid.Significance of contributions[39] As to contributions, the report notes:2120 Old-age Pensions Act 1898 (NZ) 62 Vict 14.21 Annual Report of the Canada Pension Plan 2014-2015, above n 17, at 251-261.The CPP is financed through investment income and through mandatory contributions from employees, employers and those who are self-employed.When it was introduced in 1966, the CPP was designed as a pay-as-you-go plan with a small reserve. This meant that the benefits for one generation would be paid largely from the contributions of later generations. This approach made sense under the demographic and economic circumstances of the time, due to the rapid growth in wages, labour force participation and the low rates of return on investments.When federal, provincial and territorial Ministers of Finance began theirreview of the CPP's finances in 1996, contribution rates, already legislated to rise to 10.1 percent by 2016, were expected to rise again — to 14.2 percent by 2030 — to continue to finance the CPP on a pay-as-you-go basis. Continuing to finance the CPP on the same basis as in the past would have meant imposing a heavy financial burden on the future Canadian workforce. This was deemed unacceptable by the participating governments.Amendments were therefore made in 1998 to gradually raise the level of CPP funding by: increasing contribution rates over the short term; reducing the growth of benefits over the long term; and investing cash flows not needed to pay benefits in the financial markets through the CPP Investment Board in order to achieve higher rates of return. A further amendment was included to ensure that any increase in benefits or new benefits provided under the CPP would be fully funded.According to the financial projections of the Twenty-sixth Actuarial Report on the Canada Pension Plan, the annual amount of contributions paid by Canadians into the CPP is expected to exceed the annual amount of benefits paid out up to and including 2022, and to be less than the amount of benefits thereafter. Funds not immediately required to pay benefits will be transferred to the CPP Investment Board for investment. Plan assets are expected to accumulate rapidly over this period and, over time, will help pay for benefits as more and more baby boomers begin to collect their retirement pensions. In 2023 and thereafter, as baby boomers continue to retire and benefits paid begin to exceed contributions, investment income from the accumulated assets will provide the funds necessary to make up the difference; however, contributions will remain the main source of funding for benefits.The goal of the financing policy of the CPP is to ensure the long-term financial sustainability of the Plan by stabilizing the ratio of assets to expenditures under the steady-state contribution rate. As such, the key measure of the financial health of the CPP is the adequacy and stability ofthe CPP's steady-state contribution rate and, thus, the legislated rate overtime. If, at any time, the legislated contribution rate is lower than the minimum contribution rate, and if the Ministers of Finance do not recommend either increasing the legislated rate or maintaining it, then legislative provisions would apply to sustain the CPP. An increase in the legislated rate would bephased in over three years, and benefit indexation would be suspended untilthe following triennial review. [40] Thus, contributions to the CPP in a given year fund the payments of CPP made in that year and, in addition, contribute to a fund which will be used when annual contributions are no longer sufficient to meet annual payments. Those compulsory contributions therefore play exactly the same role as taxation plays in New Zealand. In New Zealand, taxation funds both the pay as you go NZS and, subject to executive decision from time to time, the pre-funding of the future cost of universal superannuation represented by the New Zealand Super Fund.Role of CPPIB[41] Finally, as to the role of the CPPIB:22Created by an Act of Parliament in 1997, the CPPIB is a professional investment management organization with a critical purpose — to help provide a foundation on which Canadians build financial security in retirement. The CPPIB invests the assets of the CPP not currently needed to pay pension, disability and survivor benefits.The CPPIB is accountable to Parliament and to the federal and provincialMinisters of Finance who serve as the CPP's stewards. However, the CPPIBis governed independently from the CPP, operating at arm's length fromgovernments. Its headquarters are located in Toronto, with offices in Hong Kong, London, Luxembourg, New York and São Paulo.The CPPIB's legislated mandate is to maximize investment returns without undue risk, taking into account the factors that may affect the funding of the CPP and its ability to meet its financial obligations.According to the Twenty-sixth Actuarial Report on the Canada Pension Plan, the Chief Actuary reaffirmed that the CPP remains sustainable at the current contribution rate of 9.9 percent throughout the 75-year period of his report. The report also indicates that CPP contributions are expected to exceed annual benefits paid until 2023, when a portion of the investment income from the CPPIB will be needed to help pay CPP benefits.[42] The role the CPPIB has, in investing Canada's pre-funding sovereign fund,forms a key part of the Government's overall arrangement for the CPP. That theCPPIB is a separate legal entity, independent from but accountable to the Parliament and the Federal and Provincial Ministers of Finance, does not in any way mean that22 At 262.CPP payments cease to be payments forming part of a programme which is administered by or on behalf of the Government of Canada.[43] Based on those explanations I am satisfied that the CPP meets all the requirements of s 70 of the Act, however those requirements may be expressed. The CPP provides, as does NZS, a retirement benefit or pension. It does have a different design. The CPP, as opposed to the NZS, is a benefit for workers in their retirement. The NZS is a universal benefit. But, for people such as Mr Fountain, the CPP payments form part of a programme which provides benefits in response to the loss of earnings that follows assumed retirement at the age of 65. That is also the age at which NZS assumes retirement from work, and that benefit becomes payable. The CPP, notwithstanding the role of the CPPIB, is administered by or on behalf of the Federal and Provincial Governments of Canada. The role of the CPPIB is to invest contributions that are not needed to make the payments due from the scheme in any given year. The CPPIB and the fund it administers play, relative to the CPP, functions not dissimilar to those played by the Guardians of the New Zealand Superannuation Fund, in relation to NZS.[44] I acknowledge that there are features to the CPP, not present in the NZS. Again, quoting from the Annual Report:23FeaturesThe CPP also includes many progressive features that recognize family and individual circumstances. These features include pension sharing, credit splitting, portability and indexation.Pension SharingPension sharing allows spouses or common-law partners who are together and receiving their CPP retirement pensions to share a portion of eachother's pensions. This feature also allows one pension to be shared betweenthem even if only one person has contributed to the Plan. The amount that is shared depends on the time the couple has lived together and their joint CPP contributory period. Pension sharing affords a measure of financial protection to the lower-earning spouse or common-law partner. Also, while it does not increase or decrease the overall pension amount paid, it may result in tax savings. Each person is responsible for any income tax that may be payable on the pension amount they receive.23 At 256.Credit SplittingWhen a marriage or common-law relationship ends, the CPP credits accumulated by the couple during the time they lived together can be divided equally between them, if requested by or on behalf of either spouse or common-law partner. This is called "credit splitting." Credits can be spliteven if only one partner contributed to the Plan. Credit splitting may increase the amount of CPP benefits payable, or even create eligibility for benefits.Credit splitting permanently alters the Record of Earnings, even after the death of a former spouse or common-law partner.PortabilityNo matter how many times workers change jobs, and no matter in which province they work, CPP and QPP coverage remains uninterrupted.IndexationCPP payments are indexed to the cost of living. Benefit amounts are adjusted in January of each year to reflect increases in the Consumer Price Index published by Statistics Canada. As CPP beneficiaries age, the value of their CPP benefit is protected against inflation.[45] Mr Fountain pointed to some of those features, in particular pension sharing and credit splitting, in support of his contention that CPP benefits are, in effect, transferable personal property. Whether that is an accurate description depends on how Canadian law would interpret those aspects of the CPP. For the purposes of this judgment, however, they are simply features of the compulsory Government scheme whereby Canada provides, amongst other things, for the support of its working population beyond the assumed age of retirement.Result and costs[46] I am therefore satisfied that the Authority did not err in concluding that s 70 applied to Mr Fountain's CPP payments, requiring his NZS to be abated accordingly.Mr Fountain's appeal is therefore dismissed.[47] I did not understand the respondent to seek costs. If that understanding is not correct, I am nevertheless of the view that costs should lie where they fall.[48] Finally this judgment has, I acknowledge, taken far too long to produce."Clifford J"Solicitors:Crown Law Office, Wellington for RespondentCopy to:The appellant