By Amanda Morrall
Financially strapped Cantabrians affected by last week's deadly earthquake will be able to tap into KiwiSaver funds as a 'last resort' emergency measure.
The scheme's built-in 'hardship' clause allows for anyone facing 'significant financial hardship' to apply to withdraw their accumulated savings, minus member tax credits, the NZ$1,000 kick-start and 'disregarding negative or positive returns.'
SBS Bank, one of dozens of KiwiSaver providers with customers in Christchurch, was expecting to see a flurry of applications. That was on top of mortgage repayment suspensions, extended overdrafts and discounted loans that many banks, including SBS Bank, were offering in the wake of last Tuesday's earthquake.
CEO in charge of SBS's Lifestages KiwiSaver, Graham Duston, said the bank would endeavour to expedite any claims that came in, noting they normally were processed quickly. He said staff at the recently reopened Christchurch branches in Papanui and Riccarton would be able to assist where possible with forms.
"We're lucky we have a physical site in Christchurch where people can come. That's one of the advantages of having offices in Christchurch.''
General information on KiwiSaver hardship applications can be accessed through the IRD's KiwiSaver website however providers themselves are the main contact for those who have been investing for longer than three months. (See our KiwiSaver section here for information details about your scheme).
Under KiwiSaver legislation, it is mandatory that a 'position statement' included as part of that process be witnessed by a Justice of the Peace or a solicitor. That statutory declaration would be then be forwarded on to the KiwiSaver provider's trustee who decides if there are sufficient grounds for the application to be approved.
The trustee in SBS's case, personally affected by the earthquake in Christchurch, had relocated to Dunedin but was actively working. Duston said the trustee also had offices in Wellington.
As all KiwiSaver providers are governed by the same rules, a similar procedure would most likely apply to the others, Duston said.
Commerce Minister Simon Power announced Tuesday that Government would work with trustees to make the process easier for earthquake victims. (See press release here).
Raewyn Fox, CEO of the New Zealand Federation of Family Budgeting Services, said prior to the earthquake her organisation had seen a sharp rise in the number of hardship applications for KiwiSaver funds, a result of the economic downturn.
Fox said the paperwork in some cases was quite onerous as applicants had to demonstrate their financial need and also show they were trying to manage their situation through budgeting, debt consolidation or other means.
The Federation offered free assistance in this regard. 0508 BUDGETLINE 0508 283 438
Under normal circumstances hardship cases are defined as follows:
- unable to meet minimum living expenses
- unable to meet mortgage repayments on the home you live in, resulting in your mortgage provider enforcing the mortgage on your property
- modifying your home to meet special needs because of you or an dependent family member having a disability
- paying for medical treatment if you or a dependent family member becomes ill, has an injury, requires palliative care.
- suffering from a serious illness
- incurring funeral costs if a dependent family member dies.
In some cases, applicants might also have to:
- show the reasonable alternative sources of funding have been explore
- complete a statutory declaration about your assets and liabilities
- provide other documents or information to support your application.
Duston said in some cases of serious illness applicants were able to withdraw their entire KiwiSaver funds, including Crown contributions, and returns. It was not unknown whether the gravity of the Feb.22nd earthquake would allow victims the same privilege.
Duston said victims of the earthquake facing genuine financial hardship would not be subjected to unnecessary rigours if the most crucial and pertinent information was contained in their position statement. Most people who applied for hardship claims did not do so frivolously, he said.
"Generally speaking when people make this application, it is a last resort so we don't find people gaming this. I'm not expecting that to happen.''
More information on hardship applications is available on the Government's official KiwiSaver website.
*Updates with Commerce Minister Simon Power's announcement April 19th that Government was working with trustees to simplify the application process for earthquake victims.