MSD apologises after tens of thousands of payments wrongly cut in policy bungle

More than 30,000 social welfare payments totalling more than $2 million were wrongly suspended following a law change last year, a just-released MSD review reveals.

The Ministry of Social Development has apologised, saying the situation could have caused “a lot of anxiety” for those impacted.

The winter energy payment was incorrectly included in legislation which required clients to complete a form confirming their details to continue receiving certain welfare support.

If they did not complete the form, certain welfare payments could be stopped.

When the legislation was implemented, 16,270 clients, who were also receiving a pension, had their winter energy payments suspended. In the review, MSD said it had not sought a decision on whether the winter energy payment should be part of the policy and “that omission” meant it was included as a payment that could be stopped for not completing the form.

MSD said it has apologised to impacted clients and corrected the payment issue. The largest payment impact to a couple or individual with independent children was $468.21 and for an individual it was $301.

In addition, there were almost 15,000 cases of payments being suspended because of delays in processing the new CYC forms. MSD acknowledged in the report the amount of resource, such as staffing levels, it allocated to processing the forms was insufficient.

Most of these cases, 11,990, involved people who were receiving supplementary assistance such a pension. Just under 2500 of these cases involved people who receive a main benefit.

The total amount for cases involving a main benefit was around $850,000 – and $1.7 million for cases relating to supplementary assistance. The overall average arrears payment per client was an estimated $180.

The average payment was $390 (to a client receiving a main benefit) and the highest payment was almost $3000.

MSD chief executive Debbie Power said the department had a long history of implementing important and complex legislation, including under short time frames, and doing a good job of it.

“That did not happen in this case. We did not meet the expectations we have of ourselves, or that others have of us,” Power said.

“I would like to apologise to everyone affected. Some people did all the right things but still had their payments suspended.”

Power said the review spanned 51,000 client files. In some cases the suspensions resulted in delayed payments. In other cases, suspensions were resolved before their next payment was due, she said.

“We know that even a short suspension of payments could have caused a lot of anxiety and trouble meeting costs.

“We are committed to learning from this. We will be carrying out the review’s recommendations.

“This has been about our implementation of the Mandatory Reviews Act 2025. The intention of the mandatory reviews is to ensure people are being paid at the right rate and getting what they are entitled to.”

“It’s always been part of client obligations to keep MSD updated on their circumstances. What’s new is that starting in March, we are progressively carrying out checks for about 330,000 clients a year. To date about 137,000 reviews have been undertaken.

Power said if a client did not respond in time or provide the required information, their assistance was suspended. The review identified two main issues.

“The legislation excluded an important clause. Winter Energy Payments shouldn’t have been suspended if NZ Superannuitants and Veteran’s Pension recipients didn’t complete their Confirming Your Circumstances (CYC) check in time.

“That exclusion from the legislation was on us. It was never the intention that their WEP was open to suspension,” she said.

“The review also found that MSD didn’t correctly forecast the workload involved in processing CYC responses from clients, and as a result backlogs built up.

“Fewer people responded using online forms than anticipated, and many more people than expected had changes in their circumstances to report. This meant staff had to spend longer working on each return.”