KiwiSaver withdrawals go up: but how does it actually work?

Large numbers of New Zealanders continue to withdraw money from KiwiSaver due to financial difficulties.

Due to this, more than 4200 members withdrew money in August, compared to 2760 in August last year.

But how do you do a financial hardship withdrawal, how long does it take, and what might you be denied?

What can you claim for?

KiwiSaver members can apply for withdrawal for extenuating circumstances in very limited circumstances.

You can apply if you can’t pay your minimum living expenses – electricity, water and food bills, if you can’t keep up with your mortgage or rent, if you need to modify your home to accommodate special needs or if you need it. Pay for medical treatment or funeral expenses.

The Financial Services Council has produced guidelines explaining how applications will be considered.

If you need money for clothes, pay for the basics, not “upmarket” brands or expensive items.

Accommodation costs may include rates, insurance and basic maintenance, but if the accommodation is of an “excessively high standard” and becomes a reasonable means of accessing the money, those additional costs will not count as “minimum living expenses”.

Private school fees may be included, when those costs have already been incurred – but international school trips are not.

You can’t usually claim for things like paying fines, debt collection agency bills, a hire-purchase loan for unnecessary expenses, going on holidays or visiting a sick relative.

While KiwiSaver providers compile information from their members to make an application, the schemes’ supervisors make the final decision.

David Callanan – general manager of corporate trustee services at Supervisor Public Trust – said there could be significant financial hardship, for example, when someone has more expenses than income and no other savings.

It also needs to show that people have tried to find other ways, he said.

They may need to ask for repayment arrangements from the bank, for example, or for help from work and income.

What about weight loss surgery, or IVF?

Callanon’s colleague Amy Kavanagh says people can apply for things like bariatric surgery under the serious illness rules.

“If they are unable to work, they will not be able to earn an income and … as per the medical advice, they will be able to do the surgery, they will get documents as evidence. Their financial condition and medical assessment – if they meet the criteria, a certain amount of funds will be released for that.” Can do.”

Unnecessary medical expenses such as cosmetic dental treatment or IVF are generally deductible, but can be assessed on a case-by-case basis, FSC said.

How much can you claim?

You can apply to withdraw all funds in your account other than government contributions.

But this does not mean that you will be approved for the full amount. Payments for living expenses are usually made in 13-week allotments.

What is the application process like?

Coura KiwiSaver founder Rupert Carlyon said people should take their time on the application as there can be a lot of paperwork to work through.

If you’re applying for money for a car, for example, you’ll need to provide your bank statements, copies of ID signed by a justice of the peace, pay slips, proof of address, car quotes and confirmation from NZTA that you have them. No other vehicles will be registered in your name. If you live with a partner, you will also need to provide information about their income, assets and expenses, and a breakdown of your household expenses.

You may also need to provide proof that you have no further support available from work and income.

Liam Robertson, a financial adviser at Milford, said the turnaround was currently between five and eight working days.

What mistakes do people make?

Carlyon said the biggest thing that got in the way of the application was that people didn’t understand that it was a last resort.

Sometimes they want to withdraw money from KiwiSaver because they don’t want to break the term deposit or use other funds, he said.

“The real understanding that financial hardship is only when you have no choice – if you can undo something, do it first.”

He said some argued that since it was their money, they should be allowed to withdraw it all to pay off the debt. But generally, you can only claim enough to cover the arrears.

Carlyon says having money locked up is the price people pay to access employer and government support.

He also said that his team will go to the creditors who owe them money and ask them if their payments could be delayed. “A person can say no and it’s fine if they say no hat but we have to see if that question is asked.”

Carlyon said people should also consider the long-term implications. Taking $10,000 may be a simple decision, but over 30 years the impact of that withdrawal can add up.

“Take your time to work through it, take it seriously – you’ll get a better result than if you rush it and expect it to come right away.”