Q: I have been with KiwiSaver for two years and not saved a great deal. These days I only work on a casual basis as I am 59 and semi-retired.
I am planning to sell up in the next couple of years and move permanently to the US. My daughter lives there and will become a US citizen in 18 months, so she is applying for my green card automatically under the relative scheme.
Can you tell me what is my best option with KiwiSaver? Can I pull out now? Or am I locked into this?
I see it as pointless me being in it if I don't get full entitlement from it - as I was led to believe - as I have heard some strange stories on talkback radio about it and read some too.
It seems that the Government is changing the rules and the scheme is becoming full of fishhooks and having haircuts. I don't think it is a savings scheme that has any integrity as they are now going to change the rules so they can raise another $500 million for the Christchurch rebuild.
And there are many other issues relating to how not to get our money that we are led to believe we are saving for.
I want to pull out of KiwiSaver. Will I lose my contributions or what? I am not sure what to do, other than that this scheme is useless for me.
A: Talkback radio has a lot to answer for. Far from being useless to you, KiwiSaver is a way you can get extra money - perhaps $1000 or so - from the Government.
But first, it seems you've heard and read a lot of untrue stuff. The current Government's only planned change for KiwiSaver is to automatically enrol all employees, while giving them the right to opt out if they choose. And if we get a different government, the most likely change is a move to compulsory KiwiSaver. Neither would affect you.
What if other changes take place? If you don't like what happens, you can pull off the KiwiSaver highway and park. Employees can take a contributions holiday, while non-employees simply stop contributing.
Sure, you would lose that choice if the scheme is made compulsory. But can you really imagine a government making an unreasonable move that would anger all employees?
On withdrawing your money, generally you can't do that unless you buy a first home or reach NZ Super age - unless you're seriously ill, in big financial trouble, or - relevant to you - you go overseas.
After a year in any other country but Australia you can sign a declaration that you plan to stay away and withdraw all your money except the tax credits you've received from the Government. The $1000 kick-start, employer contributions, your own contributions and returns earned on all the money are yours to keep. Better still, if you wait untilyou reach 65 you can withdraw the whole lot - a smarter move at your age.
In the meantime, I recommend you ask your provider how much you've contributed to KiwiSaver since July 1 last year. If it's less than $1043, top it up to that amount before June 30, so you can receive the maximum $521 tax credit.
Then, regardless of whether you're working, make sure you contribute at least $1043 each year until you go overseas - at which point you're no longer eligible for tax credits. This will tie up some of your money, but for only a few years. And it will give you a nice little bonus at 65 to spend on fun in the US.
For more on maximising tax credits, see the end of this column.
PS: Please laugh with me - rather than taking offence - at the picture of something being full of fishhooks and having haircuts. Sounds like a bizarre horror movie!
Cases of hardship
Q: I really do hope the writer of the first letter last week did get the withdrawal they required from KiwiSaver. However, they sadly probably won't. Although KiwiSaver proudly proclaims on its website that hardship withdrawal is available, it is definitely not.
My husband and I are also in a very precarious position due to employment redundancies over the past year and a half. Our ages are 62 and 55 and collectively we have over $100,000 in KiwiSaver.
We fulfilled all the requirements that the hardship withdrawal requires and then some. We filled out the numerous forms requiring a variety of details and calculations, plus collected information from sometimes several visits to accountant, Winz, budgeting service and JPs.
After six weeks of waiting while our available funds went into precarious overdraft, the return reply of a one-line email from KiwiSaver was a flat "No". I basically had a nervous breakdown and required psychiatric care.
Since then we have found out from numerous people that no one ever gets a hardship withdrawal from KiwiSaver - and this information we have got from recognised professionals also.
We finally borrowed money from family, and I got a part-time job at minimum wage rate to try to help pay the mortgage. And yes, before you ask, we did have quite a bit of accessible funds before the redundancies occurred, but of course over time this got usedup.
The moral of the story is: if you are young and want the first-home subsidy, by all means save via KiwiSaver. But after you have bought your home, don't bother. Put your retirement funds into another type of investment that you can access.
My husband and I are now on the verge of having to sell our home that we have worked hard to own - and which we own 90 per cent of the equity in - purely because KiwiSaver will not give us a portion of our funds to pay off our mortgage or at least pay for groceries!
This is ironic considering that the money we require is just sitting there in KiwiSaver and we will have to wait for three painful years to access it - by then probably without the house we wanted to retire in.
A: Oh dear - more "untruths" about KiwiSaver.
Nearly 28,000 people have withdrawn more than $100 million of KiwiSaver money in times of financial hardship since the scheme began, according to data providers have sent to Inland Revenue. The numbers have increased year by year, with more than 7000 taking out more than $28 million in the most recent year.
Of course that doesn't tell us how many have been turned down. But one KiwiSaver provider says about 95 per cent of the applications that come to him are successful.
When someone fails, it's usually because investigations show the person isn't in genuine hardship, he says. (Warning to other readers: if you're telling a provider you've just lost your job and your spouse, don't publicly post contradictory news on Facebook the same week!)
I'm not saying you're not genuine. Your plight sounds real enough and the refusal to let you withdraw is mysterious. I feel for you.
Have you thought of switching to another provider and trying with them? I've heard of people doing that, sometimes successfully. And it's easy to switch. You just approach the new provider and they move the money for you.
Failing that, I suggest you talk to your mortgage lender about your situation. Given that you'll be able to pay off the mortgage in just three years, I would be surprised if they don't let you either pay interest only in the meantime, or take a holiday from making any mortgage payments.
If you do the latter, the bank will keep charging interest, so your mortgage will grow. But in the meantime, your KiwiSaver balances will also be growing.
How fast? I would suggest that the money in the 62-year-old's KiwiSaver account should be in a conservative fund, given that you expect to spend it in just three years. That means the return on that account - and perhaps also the 55-year-old's account - will almost certainly be lower than the mortgage interest rate. But we're talking less than three years, so the difference in the two returns won't have a huge effect.
On your "moral of the story", I agree about saving for a first home. And I recommend that people put only enough into KiwiSaver to get all the incentives, making further saving where they can access the money - unless they prefer to lock up their savings so they won't be tempted to fritter away the money.
But I don't agree that it's wise not to bother with KiwiSaver at all.
Many people's KiwiSaver balances are twice what they would have had if they had saved elsewhere, without the government and employer contributions. Often it's more than twice.
You two, as former employees, would quite likely have less than $50,000 if you'd saved elsewhere. In the long run you'll probably find you're better off financially having been in the scheme - even though you're going through really bad times now, and I don't want to belittle that.
Good luck with switching schemes or coming to an arrangement with your mortgage lender.
Get your free money
Many people are missing out on receiving the maximum KiwiSaver tax credit. That's a pity, as that extra money makes a big difference in the long run to your total savings.
If you're one of those affected, you can take action in the next week or so to avoid missing out.
Everyone aged 18 to 64 - as well as those over 65 who have been in KiwiSaver for less than five years - is entitled to a tax credit of 50c for every dollar you contribute up to a certain level.
As long as you've been in the scheme and eligible for more than a year, the maximum tax credit is $521. You'll receive that if you've contributed at least $1043 between July 1, 2013, and June 30, 2014. If you're eligible for only part of the July-June KiwiSaver year, your maximum will be lower. (See the fourth Q&A in last week's column for details on this.)
The following people will automatically have contributed enough to get the maximum tax credit:
Employees earning more than $34,762 and contributing 3 per cent of their pay to KiwiSaver.
Non-employees who contribute $20 a week or $87 a month.
Anyone else would be wise to top up their contributions. This includes people on contributions holidays, who can still contribute whatever they like. Even if you can put in only $100, that will get you a $50 tax credit from the Government.
According to the Commission for Financial Literacy and Retirement Income, in June 2012 more than half the people in KiwiSaver didn't contribute enough to receive the maximum tax credit. Since then, the rise in the minimum employee contribution from 2 to 3 per cent will have reduced that number, but it's still believed to be pretty high.
Let's get the number down and people's savings up.
One more thing: I suggest you don't wait until the June 30 cutoff date to deposit the money, as it may take your provider a few days to process deposits.
• Mary Holm is a freelance journalist, member of the Financial Markets Authority board, director of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to email@example.com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.