MSD payment blunder leaves thousands waiting as benefit errors reach $2.5 million

Auckland (The NZ Today)

Thousands of New Zealanders were left without expected support payments after a major processing failure at the Ministry of Social Development (MSD) resulted in more than 30,000 payments being wrongly suspended, a government review has found.

The review found the errors affected more than 2,400 main beneficiaries, with some people left thousands of dollars out of pocket before receiving back payments. The total amount owed to affected clients reached around $2.5 million.

The problems emerged after changes were introduced requiring some beneficiaries to confirm their personal circumstances each year to continue receiving payments.

One major issue involved the Winter Energy Payment, which should not have been included in the new review process. However, thousands of pensioners and veterans had their payments suspended because the exemption was not properly applied.

The review found 16,720 Winter Energy Payments were incorrectly stopped, with MSD acknowledging it failed to fully understand how the new rules interacted with existing payment systems.

A separate issue occurred when MSD faced delays processing a large number of annual reviews. More than 2,400 people had their main benefits suspended, while nearly 12,000 people had supplementary assistance payments stopped during the disruption.

Some affected clients were later paid back what they were owed, with the average arrears payment for main benefits around $390, while some received close to $3,000.

The review found concerns about the Winter Energy Payment issue were raised internally for several months before being escalated to senior management. MSD said the issue was initially treated as individual client concerns rather than a wider system problem.

MSD Chief Executive Debbie Power apologised, saying the agency did not meet its own expectations in managing the changes.

“We did not meet the expectations we have of ourselves, or that others have of us,” she said.

The review identified several failures, including insufficient planning for the increased workload, weaknesses in checking legislative changes and delays in recognising unintended impacts on clients.

MSD said all affected people have now been repaid the money they were entitled to, but no additional compensation will be provided because there is currently no legal authority for such payments.

The review has recommended stronger oversight when introducing new laws, better preparation for major system changes and improved processes to identify problems earlier.

Source: Ministry of Social Development review.