Personal finance editor Amanda Morrall takes a closer look at two provisions for early access to KiwiSaver funds: financial hardship and permanent emigration.

Personal finance editor Amanda Morrall takes a closer look at two provisions for early access to KiwiSaver funds: financial hardship and permanent emigration.

Q)Financially I have been stuck in a never ending rut for some time, but I recall from when I was in a better situation being told by my bank about using my KiwiSaver funds to help me out. Please advise. 

A) Sorry to hear about your financial woes.Your memory serves you correctly about being able to tap your KiwiSaver funds if you are in dire straights.

This determination, about the gravity of your financial situation, is actually made by the trustee who governs your KiwiSaver scheme.  We all have a different idea of what constitutes financial distress so ostensibly this is a way to make a more impartial call on that. You'll remember that a few individuals tried to justify their inability to buy Rugby World Cup tickets as a financial hardship. They weren't successful. 

The following is a guideline from the KiwiSaver Act on terms of financial hardship:

Significant financial hardship includes if you're:

  • 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 a dependent family member having a disability
  • paying for medical treatment if you or a dependent family member:
    • becomes ill
    • has an injury, or
    • requires palliative care
  • suffering from a serious illness
  • incurring funeral costs if a dependent family member dies.

As you mentioned you are from Christchurch, and also on a disability benefit of some kind, I expect the threshold to prove your case won't be too hard. Following the Feb.22 earthquake, Government instructed providers to ensure that earthquake victims from Christchurch suffering from financial hardship be allowed to access their KiwiSaver funds without undue delays and effort.

That said, from what I have heard it can be a cumbersome process. To start, you'll need to go to your provider to get the ball rolling. You'll have to show proof that you are struggling financially. In some cases, trustees have rejected claims forcing KiwiSavers to go through a budgeting advisory service to see whether or not they really are in trouble. 

Considerations to bear in mind:

Before you pull the plug on your KiwiSaver, it's important to evaluate where you are at globally with your finances. In this regard, it might be worth your time to visit a budget advisory service first. You can access such services for free. Here's a link to the Federation of Family Budgeting Services. They will be able to point you in the direction of an advisor.

How much do you have?

You mentioned a specific figure that you are in debt. If you are thinking your KiwiSaver funds will pay this debt off in full, keep in mind that under the financial hardship clause, you only get back what you paid in, and your employer. So you won't get the $1,000 back from your kick-start. Nor will you get back the member tax credits from Government. Take this into account with your calculations before you go to the trouble of trying to pull your funds out.

Contributions tracking?

You should be getting an annual statement from your KiwiSaver provider alerting you to your balance. That said, a good chunk of people remain in default funds that were randomly allocated so many KiwiSavers are clueless about who they're invested with and even foggier about what kind of fund they're in. 

If this is you, you can find out who your provider is and how much you have paid into your KiwiSaver by going to the KiwiSaver website. I'm including the link here. If you are already registered as an on-line user for Inland Revenue you just plug in the same user name and password.

If you aren't registered for on-line services with IRD, you can do so here. All you need is your IRD number. If I recall correctly there is a 12 or 24 hour waiting period in between the time of initial registration and getting set up with your password. Once you've tackled all that, it's smooth sailing.

On the website you'll find out who your provider is, how much you've paid into your KiwiSaver, how much your employer has paid into it, and also how much you've received in member tax credits.

Once you have that information, you'll be in a better position to know how far your funds will go toward your debt.

Keep in mind that KiwiSaver is a long-term savings vehicle that is meant to help you financially in your retirement. If you are struggling to make ends meet today, and you're really not in a position to maintain it because you're going backwards, it might not make sense. Just make sure you've explored all your options first. It could be that a contributions holiday could be a better course of action. A qualified budgeting advisor should be able to help you make that determination if you can't, for whatever reason, do so yourself.

Question two:

Q) I am thinking of leaving NZ and returning to the U.K. I am 60 years old. What do I need to do to get my Kiwisaver funds?

A) As you might already be aware, permanent emigration is one of the four accepted reasons for being able to get out of KiwiSaver early. The other three are: financial hardship,  serious illness and first time home buying. Here's a link to the official KiwiSaver website outlining early access provisions. 

What do you need to do?

First, you'll need to contact your provider to obtain the required paperwork. Remember that before you can get access to that money, you'll have to have waited a minimum of 12 months but you might as well get all your ducks in a row before hand to speed up the process for when the date ticks over.  Among the paperwork you'll need is a statuary declaration swearing that you've left the country, passport records, airline tickets, as well as evidence that you live somewhere else in the U.K.

What will you get?

Basically you'll get back everything you paid into the scheme, the $1,000 kick-start, any contributions your employer or employers here  have made, plus the returns earned on the investment. What you won't get back are the member tax credits that Government chipped in over the time you've been invested. Up until July last year that was a maxiumum of $1043. That's since been cut in half to $521.

If you want to see exactly how much in member tax credits you'll forfeit, you can go to the KiwiSaver website. To access your personal information and details, you need a on-line registration user name and password. It's the same one you use to access IRD's website. This link will take you directly to the registration site for IRD. So long as you have your IRD number handy, you're in business.

If you're after more information on keeping track of contributions, check out this link.  And this one  will specifically explain how to obtain the break down in payments between your contributions, your employer and Government's share. 

If you are not on-line savy, don't stress. You should be able to get all this information over the phone from someone at Inland Revenue.

Here's the phone number.

0800 KIWISAVER (0800 549 472).

If you're calling from outside New Zealand, call +64 4 978 0800.

Calling hours are 8am to 6.30pm, Monday to Friday.

Do you have a question on KiwiSaver?

See our comprehensive Q&A section here or drop us a line.

 

 

 

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The KS holiday is the better option for someone needing to repay consumer debt for a couple years. Easy to request - no special hardship proof needed.
Perhaps more reluctant KS joiners might join if knew the 'holiday' option better.