KiwiSaver: When death taps you on the shoulder

Lawyer Mai Chen set up the Will to Live website last year. Photo / Mark Mitchell

No matter what the future holds, an updated will and the ability to access KiwiSaver funds can be a blessing.

I am 56 years old and still work full time, but I have not yet joined KiwiSaver.

I now have advanced breast cancer and may live for 10 months to 10 years - time is unknown.

If I were to join KiwiSaver and became imminently terminal, would I be able to access the funds urgently?

Would my estate be able to claim?

If so, what percentage?

How long would the process take?

KiwiSaver is open to any New Zealand citizen, or person entitled to live here indefinitely, who is currently living here and is under 65.

There are no exclusions if you are sick or terminally ill.

On joining KiwiSaver you will get the $1000 government kick-start, plus become eligible for the annual member tax credit of up to $524.

Because you are working your contributions will come out of your pay at a rate you choose - 3 per cent, 4 per cent or 8 per cent - and invested in your choice of KiwiSaver scheme.

Your employer will also chip in 3 per cent of your pay.

Martin Lewington, Mercer's New Zealand managing director, gives the nuts and bolts of withdrawing your money early or after death:

"As you say, the future is unknown but planning can help you prepare for life's uncertainties.

"We always recommend that people talk to an appropriately qualified financial adviser who can provide advice which takes into account their particular circumstances.

"To answer your questions about KiwiSaver withdrawal options and processes, if the trustee of your KiwiSaver scheme is satisfied that your health means you are either unable to continue working or you are facing a serious and imminent risk of death, you can get prompt access to your funds.

"All KiwiSaver schemes provide guidance on what medical and other information their trustee requires to make that decision and trustees generally aim to pay such members promptly.

"Your funds include your contributions, your employer's contributions, the $1000 kick-start contribution which you receive when you first join, any member tax credits and investment earnings.

"You may also be able to access some of your funds at any time, if your KiwiSaver trustee accepts that your medical condition is causing significant financial hardship.

"In this situation, you can only access your own and your employer's contributions, as well as any accumulated investment earnings.

"You can't access any of the government contributions ($1000 kick-start and member tax credits).

"Your estate will be able to make a claim and receive all your funds, i.e. your contributions, your employer's contributions, the $1000 kick-start contribution which you receive when you first join KiwiSaver, any member tax credits and investment earnings.

"The time it takes a KiwiSaver provider to release funds to an estate depends on a number of factors, including the value of the KiwiSaver member's account and whether or not the member has left a will," says Lewington.

The IRD says it can take three months for the government kick-start to reach your KiwiSaver account, so those additional top-ups are difficult to access if your KiwiSaver account has only just been started.

"If you want certain people to receive your KiwiSaver funds, we suggest (if you haven't already) that you make a will and record who your beneficiaries are," says Lewington.

Your solicitor will also be a good source of information on payments to estates.

Lewington mentions a will and although slightly off the KiwiSaver topic, the Will to Live website - www.willtolive.co.nz - set up last year by lawyer Mai Chen is a fabulous starting point for thinking about life, death and preparing a will.

The website logo is a tiny bird, which represents a Buddhist saying:

"Every day, ask the little bird on your shoulder, 'Is today the day I die? Am I ready? Am I doing all I need to do? Am I being the person I want to be?'."

Chen, in an interview with Radio NZ last year, says considering her own death transformed her life.

She says death motivates her and made her realise she had just one shot at life.

"I want to do everything I can and then I'll be gone."

Not only does the Will to Live site include well-known New Zealanders talking about death and sharing their bucket lists, there is a function to help draft a low-cost will.

Having an up-to-date will helps your family enormously when untangling your affairs after you have gone.

If you don't have a will - around half of New Zealanders don't - the courts will appoint an administrator to deal with your estate.

In what can be a slow process, your assets will not automatically pass to your partner but will be split between them and any children using the following formula: $155,000 plus one-third of the remaining assets to your partner and two-thirds to the children.

If there are no close relatives your estate passes to the Government.

Best wishes for your treatment.

Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.

To have your KiwiSaver questions answered by the Herald's panel of industry players, email Helen Twose, helentwose@gmail.com.