Thousands of New Zealanders were incorrectly underpaid after errors in policy drafting and the implementation of new legislation, a Ministry of Social Development (MSD) review has found.
According to a reprot by Stuff, the review, released on Thursday, examined two separate issues linked to the same legislative changes introduced last year. The errors resulted in 16,270 pensioners missing Winter Energy Payments and 14,450 beneficiaries having their main or supplementary benefits incorrectly suspended or reduced.
MSD said there was some overlap between the two groups, as some beneficiaries affected by benefit suspensions also missed out on Winter Energy Payments. The agency has not provided a combined figure.
Excluding the Winter Energy Payments, the total value of benefit underpayments exceeded $2.5 million, Stuff has reported.
Social Development Minister Louise Upston said the failures were unacceptable and apologised to those affected.
“What happened with these payments was frustrating and unacceptable, and I want to again apologise to the people who were affected,” Upston said in a statement, as quoted by Stuff.
“I am particularly disappointed it took too long for MSD to recognise there was a wider problem, even as individual cases were being reported. The Review makes clear that stronger systems are needed to identify those warning signs earlier, and I expect those recommendations to be implemented swiftly,” as quoted by Stuff.
Both problems followed the introduction of the Social Security (Mandatory Reviews) Amendment Act 2025, which came into force in March.
The legislation was passed under urgency in less than a month and introduced mandatory “Confirming Your Circumstances” (CYC) reviews for people receiving certain benefits and payments, as quoted by Stuff.
The reviews were intended to simplify the way MSD checked whether people remained eligible for their payments and required recipients to regularly confirm their circumstances.
The new requirements applied to people receiving benefits including the Supported Living Payment, Accommodation Supplement, Disability Allowance, ongoing Emergency Benefit and Emergency Maintenance Allowance. They also covered some recipients of superannuation and Veteran’s Pension, as well as the Orphan’s Benefit and Unsupported Child’s Benefit, Stuff has reported.
The first problem involved Winter Energy Payments.
For people receiving certain main benefits, the Winter Energy Payment is linked to their main benefit. If that benefit is suspended, the Winter Energy Payment is also suspended.
For pensioners and veterans, however, the Winter Energy Payment is normally paid automatically.
According to a report by Stuff, the review found that the new legislation failed to clearly exclude people receiving NZ Superannuation or the Veteran’s Pension from the requirement to confirm their circumstances to continue receiving their Winter Energy Payment.
“Interviews with MSD staff involved in the project suggest that WEP [Winter Energy Payment] eligibility for NZ Superannuation and Veteran’s Pension clients was not an area of active consideration during policy development and legislative drafting,” the review says"
“While there is no evidence of an explicit decision to suspend WEP for these clients, neither was provision made in the legislation to exclude them,” as quoted by Stuff.
As a result, Winter Energy Payments for some pensioners were incorrectly suspended.
MSD staff began raising concerns about missing payments on April 30, but the review found that the agency initially treated individual cases separately rather than recognising them as part of a wider problem.
“Over the next three months, Service Delivery staff and some clients continued to raise questions, including through local MPs’ offices,” the report says.
“As most of these questions were handled as individual client concerns, MSD did not connect those individual cases quickly enough to recognise a broader pattern and identify an unintended consequence,” Stuff has quoted.
Senior MSD leadership was not informed about the wider issue until August 13, the same day Upston was briefed.
The error ultimately affected 16,270 pensioners.
For individual recipients, the largest underpayment was $301. For couples, the maximum was $418, while the largest underpayment for a couple with a dependent child was $468, as reported by Stuff.
The second issue resulted from MSD underestimating the workload created by the mandatory CYC reviews.
The ministry had initially estimated that about one-third of people completing the reviews would report a change in their circumstances. In reality, around 80 per cent did so, as reported by Stuff.
MSD also received more paper forms than expected, with approximately 54 per cent of responses submitted in hard copy.
The increased workload resulted in processing delays, meaning some people had their benefits suspended before their responses could be processed.
Around 137,800 CYC reviews were completed from March 2.
Nearly 14,500 people had benefits suspended because of delays in processing their responses. This included about 2,460 people whose main benefit was suspended and 11,990 whose supplementary assistance was paused, as reported by Stuff.
People whose main benefits were suspended were underpaid by an average of $390, with the largest individual underpayment reaching $3,000.
For supplementary payments such as the Accommodation Supplement and Disability Allowance, the average underpayment was about $140, while the largest was $2,800.
MSD chief executive Debbie Power said the ministry had failed to meet the standards it expected of itself.
“MSD has a long history of implementing important and complex legislation, including under short time frames, and doing a good job of it,” she said, Stuff has quoted.
“That did not happen in this case. We did not meet the expectations we have of ourselves, or that others have of us. I would like to apologise to everyone affected. Some people did all the right things but still had their payments suspended,” as quoted by Stuff.
The review confirms that MSD has backpaid all people affected by the errors.
However, the ministry said it could not provide additional compensation because the Social Security Act 2018 does not authorise compensation when a benefit has been incorrectly suspended.
“The Social Security Act 2018 does not authorise MSD to pay compensation where a benefit has been incorrectly suspended. Instead, MSD’s legislative obligation is to restore the person’s correct entitlement and pay any arrears owing,” the review reads, as quoted by Stuff.
The review made four recommendations, including changing legislation to ensure Winter Energy Payments are exempt for pensioners undergoing CYC reviews.
It also called for stronger internal policy development processes, improved post-implementation support for major operational changes and better modelling of the likely workload and impacts of significant changes.
Upston said MSD had accepted all four recommendations and would implement them.
“The review released today identifies where things went wrong and what needs to change. MSD has advised me it accepts all of the recommendations and will act on them,” she said, as quoted by Stuff.
“MSD has considerable experience implementing complex legislative change, but clearly that didn’t happen in this case. The necessary checks and safeguards were not sufficient, and people were affected as a result.
“I particularly want to acknowledge those receiving a main benefit, who are likely to have been most affected. I am sorry for the impact this had on people who were relying on this support.
“My focus now is making sure this does not happen again. I expect MSD to strengthen its quality assurance around future legislative changes and implement the review’s recommendations promptly,” Stuff has quoted.
Upston was initially briefed about the issues on August 13. She apologised to pensioners affected by the Winter Energy Payment error on August 18 but did not initially address the separate issue affecting beneficiaries.
After the second issue was raised in Parliament, she acknowledged it but did not immediately apologise to those affected. She later apologised to the beneficiaries involved.
Prime Minister Christopher Luxon was also questioned about the review and whether the Government's decision to pass the legislation under urgency contributed to the problems.
Luxon said he made “no apologies for getting things done in this country,” Health and Environment Communication
“We need to speed things up and, again, what I’d say is it’s good to see they moved very quickly on the Winter Energy Payments, making sure people were made whole.
“Again, as I said, it’s unfortunate it happened but it’s most important that you fix the problem rather than just sit there admiring the problem. And that’s what they did an exceptionally good job on,” he said, as quoted by Stuff.
Luxon also appeared to confuse the review's findings with a separate issue involving hardship applications for food grants, which MSD has described as an administrative error.
“I heard them apologise, as they should have yesterday, and I’m sorry as well for people that have been impacted by that,” he said. “The good news is that 93% of all hardship applicants, I think, have been approved in recent years, and that's a good thing. But there are obviously technical issues they need to talk to,” as quoted by Stuff.