Can I get my KiwiSaver money back early?

Under what circumstances can I get my hands on my KiwiSaver money ? Is there any way I can access it? Most likely scenarios I'm thinking of would be buying first home and/or starting a business ?

Sounds like you're getting itchy feet about KiwiSaver. You're not alone.

As of the end of May (the most recent statistics available), a total of 230,589 248,241* KiwiSavers have either closed out their accounts or opted out of the scheme and another 61,332 are on active holidays or have withdrawn their funds due to "significant financial hardship).

That represents more than one in eight KiwiSavers either closing out of backing out of KiwiSaver, plus another 3.5% that for whatever reasons are not contributing to their accounts.

You probably don't need to be reminded of this but KiwiSaver is meant to be your retirement savings fund. As such, it's deliberately set up to be difficult to get out of. 

That said there are few get out-of-KiwiSaver scenarios where this is feasible. The Christchurch earthquake is one of them. Because of the financial hardship arising from the disaster,  Government has mandated that applications made on these grounds are dealt with expeditiously and with minimal hassle. 

The earthquake is not a special scenario per se, but rather falls under the category of "significant financial hardship" one of the four scenarios where KiwiSaver funds can be access.

The other situations are: "serious illness", a permanent move overseas, and purchase of a first time home.

I haven't heard directly from anyone who has gone through the process but  it is rumored to be hard work.

You can't just rock-up to your provider and tell them you want out because you're struggling that month and KiwiSaver is cutting into your holiday savings fund. You're required to provide all sorts of documention to demonstrate genuine financial hardship and a determination as to the authenticity of your case is made by the provider's trustee on a case by case basis, which can be subjective.

Buying a home, if you're a first time home buyer, is also a process that is somewhat fraught due to the technicalities and requires some research well in advance. That's due in part to the fact that the funds only get released once the sale has gone unconditional, or so that's what one provider told me.

The rules may differ slightly with some of the providers out there, particularly if you are planning on taking out a mortgage with the same provider (if they are a bank) so do your homework on that one before you place an offer. (See Amanda Morrall article on criticism about lack of transparency on first-time home buying through KiwiSaver.)

To access your provider's investment statements and information on first time home deposit, look up your scheme on our KiwiSaver section and click on the green arrow to open its investment statement.

In general terms, to be eligible to withdraw KiwiSaver funds and use them towards the purchase of a first home, members have been enrolled for a minimum of three years. The same requirement exists for the those interested in the HCNZ first time home deposit subsidy, although the qualifying criteria goes beyond that.

In terms, of the amount you can withdraw, there is no limit (so far) which is handy but you will forfeit the Member Tax Credits (MTC) that Government put in on your behalf plus the $1,000 kick start. (See example below for how much a couple could potentially bank and use towards their first-time home). And for other KiwiSaver case studies modelled on Budget 2011 changes, see this link.

I guess the upside of National's halving of the MTC as of next month is that going forward there will be less money stuck in the account to be frustrated about being locked in if you go that route. Also, looking positively at that policy, you'll at least have something left in that account to gain some interest.

Here's the link to Inland Revenue's KiwiSaver website where they outline, in very general terms, criteria for first-time home buying.

You asked about starting a business. This is an interesting one.

In the United States, there is a provision for borrowing against a 401K, the American equivalent of KiwiSaver.

I didn't have time to canvass all the providers here in New Zealand whether this was possible.

Of those that are still looking into the issue for me, their initial response - my words, not in theirs: "Not bloody likely mate.''

Graham Duston, executive director of Funds Administration for SBS, was more definitive on the question. He said as there was "no scope in the current legislation to allow for loans against your account" you would not be able to use your KiwiSaver scheme as collateral.

Whether this will change over time, is anyone guess. National hasn't closed the books on further changes to KiwiSaver so going forward, perhaps we'll see greater flexibility of access either for a good business case or perhaps borrowing on a university education?

*Corrected figure from Inland Revenue


 30-year old couple each earning $45,000, contributing 4 per cent and intending to use the first home buyer subsidy*

Bechi and Dan are both 30 and each earn $45,000 a year. They both join KiwiSaver on 1 April 2013 and choose to contribute 4 per cent of their gross wage – $34.52 a week each. Their employers contribute 3 per cent, or $21.36 after tax. They each receive the equivalent of $10 a week from the Member Tax Credit.

After three years, if Bechi and Dan decided to buy their first home, they may be eligible for a first home deposit subsidy of $3,000 each, which increases to a maximum of $5,000 after five years. They could also withdraw their own contributions, their employers' contributions and their fund returns to buy their first home. After five years they would have about $36,000 available for withdrawal, and if their combined income remained under $100,000, they would also be eligible for the $5,000 deposit subsidy, pushing their total first-home deposit to about $46,000.

Assuming they withdrew the maximum amount to buy their first home, at age 65 Bechi and Dan would have a combined balance of about $345,000, which would be enough to provide gross income of about $21,000 a year in retirement over and above the married rate of NZ Superannuation – currently $27,194 a year after tax.

*Source National's KiwiSaver modelling under Budget 2011


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