KiwiSaver is designed mainly as a long term retirement savings plan, with a secondary purpose as savings vehicle for buying a first home.
Apart from death or permanent emigration, the other avenues to access a KiwiSaver account are serious illness or significant financial hardship (SFH). This last option is the one you are considering.
The most common reason for a SFH application is when a person is "unable to meet minimum living expenses".
Other problems that may be covered are falling behind in your mortgage repayments, having to modify your home through disability, paying for a funeral or medical treatment.
Inability to pay for car repairs is unlikely to qualify, but if you are also struggling to meet rent or mortgage payments that would be a more appropriate reason for an application.
Each KiwiSaver manager has their own lengthy SFH application form and they ask that you provide a great deal of background information.
Hastings Budget Advisory Service sees a growing number of clients looking to make a SFH withdrawal from their KiwiSaver.
I asked one of their advisers for any tips on a successful application.
"It is important to be aware that the KiwiSaver scheme is not a bank account and any withdrawal is at the discretion of the scheme's trustees.
"It is very important to answer every question, in particular with regards to your assets and debts - especially any arrears that you have.
You will need to provide copies of these. Next, you will need to provide a compelling reason why the Trustees should grant your request.
Also, you will need to provide your current financial income and outgoings in the budgeting section of the form and clearly outline what you intend to use the released funds for."
Once you have filled out the form and gathered all the information (either on your own or with a budget adviser) you then need to sign the form as a statutory declaration in front of an authorised person such as a JP or solicitor.
Part of the declaration is that you have "explored and exhausted all reasonable alternatives of funding" and that you are not an undischarged bankrupt or incapable of managing your financial affairs.
Once signed, you can then post the form with attachments to the trustees.
It is up to the trustees to decide if and how much is paid out to you.
Some withdrawal forms allow for payment to third parties such as a landlord or energy company.
This may increase the change of success, as the trustees will know that the money paid out will be allocated as planned.
Some successful applicants have blown their payout on frivolous spending or even the pokies and there is nothing that can be done about that if the money has gone straight to their bank account.
Advisers at Hastings Budget Advisory Service report that 25 per cent of applications made through their office are rejected, while 55 per cent are given just enough money to cover any arrears. Only 20 per cent get all of what they ask for.
Trustees need a clear explanation of what brought about the situation - it can't be through the applicant's own negligence. Evidence and detail are important.
Is a significant financial hardship application appropriate for your situation? Perhaps there are other avenues you should try first.
- Shelley Hanna is an Authorised Financial Adviser FSP12241. Her free disclosure statement is available on request by calling 06 870 3838 or go to www.peak.net.nz. The information in this article is general and is not personalised. Send your KiwiSaver questions to firstname.lastname@example.org