The retrospective law change that will mean beneficiaries lose out on $63m

Thursday, 19 February 2026

Jay Wing has spent most of her life on a Work and Income benefit due to childhood trauma that led to debilitating mental health struggles and an inability to work. Then in 2025, she received a back-payment from ACC for loss of potential earnings.

Loss of potential earnings, or LOPE, are payments that compensate people for personal injuries sustained before they turned 18, or while they were studying.

Personal injuries can include mental injuries caused by physical injuries or another person’s criminal acts. Many recipients of these payments were victims of child or sexual abuse.

Wing only discovered she was eligible for LOPE payments in 2024, and applied right away. She was awarded approximately $45,000.

Nearly all of that was sent straight to the Ministry of Social Development (MSD) to repay the main benefit that had supported her for years. (Main benefits are a person’s primary financial support, like Jobseeker Support, Sole Parent Support and the Supported Living Payment).

The rest, about $13,000, went to Wing. But there was no benefit, she said. She was left with a debt to MSD worth nearly the same.

Why?

Because when a person who has received beneficiary support applies for - and receives - a LOPE backpay, MSD takes part of it to reimburse what it has paid out. It’s designed to stop double dipping - the LOPE backpay covers what the person should have been receiving all along, in which case they wouldn’t have needed a benefit.

Here’s why you should care. Last October, the High Court ruled that MSD was fine to do this for main benefits. But it was not allowed to claw back supplementary payments, even though it had been doing so for more than 20 years.

Supplementary payments are additional support available to beneficiaries or those on low incomes, like accommodation allowances, winter energy payments and disability allowances.

In response to that ruling, the Government has introduced an amendment bill - under urgency - to change the law. MSD has been clawing these payments back for decades and the practice should continue, Social Development Minister Louise Upston said.

But the bill is retrospective. That means it doesn’t only change the law to align with MSD’s policy going forward - it maintains any debts that people have accrued in years past. Like Wing.

That saves the Government a lot of money. Nearly 40,000 people would have had their debts wiped by the High Court’s decision - meaning MSD would have had to write off $63 million in debt.

The bill, which was introduced on Tuesday evening and is supported by the Labour Party, is currently before the select committee.

It’s about equality, minister says

So, how did we get here?

There are several reasons why someone receiving a LOPE back payment would owe money to MSD. Some, like Wing, are on MSD support for years before they learn that ACC payments are an option. Others need MSD support while they wait for their ACC assessment to be completed. That can take a long time.

And as Upston said, MSD has been clawing back these supplementary payments for at least two decades. This is because if the individual had been receiving ACC payments all along, they may not have been eligible for the supplementary support, she told Stuff.

“What we don’t want to see is people getting two forms of assistance at the same time, where they wouldn’t be otherwise eligible for it,” she said.

She added that it could cause an unfair situation, if others receiving ACC payments all along were not eligible for supplementary MSD support.

But according to Green Party social development spokesperson Ricardo Menéndez March, and Community Law law reform coordinator Rupert O’Brien, this places the individual in an unfair position.

If the person received supplementary assistance during the time they were receiving the benefit, it was because they needed it, they said.

When the High Court ruled in October, Justice Grice appeared to agree.

“The recipient of the supplementary assistance needed and was eligible for the assistance at the time,” she found. “The Ministry’s interpretation could result in the state retrospectively imposing potentially significant debts on persons of limited means, through no fault of their own.”

In choosing to change the law rather than the appeal the decision, Menéndez March accused the Government of admitting that MSD had been operating inconsistently with the law all along.

Upston would not say whether that was the case. “What we are doing now is not a policy change, it is simply legislating for what MSD’s practice is - which is to ensure that we treat people fairly,” she said.

A process without a point, Wing says

In Wing’s view, all the LOPE process achieved - after requiring her to dig up old trauma and re-engage in therapy (something she had not found helpful in the past) - was moving funds from one government department to another.

When her back-payment came through, Wing had the choice of re-paying MSD for the supplementary assistance she had received over the years, or taking the leftover payout (approximately $13,000) and setting up a payment plan for her outstanding debts.

She chose the latter and used that $13,000 to pay off various personal loans. But now her outstanding debt to MSD (excluding other money owed from previous advances) is around $13,000 as well.

“It is like they have taken from Peter to pay Paul. They just passed the money from one government department to another,” she said.

“If all the money was going to go to MSD, what was the point of even applying?” With the benefit of hindsight, Wing said she regrets pursuing her LOPE entitlement.

Wing was also given the option of receiving ongoing weekly LOPE payments from ACC. But in the meantime, her MSD benefit would be suspended.

With no way to pay rent and support her two young children during that time, Wing signed away her entitlement to any further ACC payments.

Now, she continues to receive an MSD benefit - including supplementary assistance. With that money, she is slowly repaying the supplementary assistance she received in the past.

Submissions on the Social Security Amendment Bill close on Friday.