KiwiSaver investor 'feels misled'

Around 75,000 people will be eligible to withdraw their savings from KiwiSaver on July 1. Photo / Thinkstock

A woman who will be one of the first people eligible to take her money out of KiwiSaver says she feels misled after discovering it will take weeks longer to get the funds out of the scheme than she had expected.

The saver, who wants to remain anonymous, signed up to KiwiSaver on July 3, 2007, and believed she would be able to get her money out the day, or day after, she became eligible on July 3.

But her provider has told her she is not officially eligible until July 15 and then she will have to go through a process which could take several weeks before she gets the cash.

The Otago woman, who had hoped to use the money to pay off a credit card bill and planned on updating her hearing aids and a hip-replacement, said websites for the Government and KiwiSaver providers do not make it clear how long it will take to get the money out.

"My personal view is that I have been misinformed. Right from the start of the scheme and subsequently. None of the changes that affect my financial decision-making processes have been clearly told to me," she said.

"It may have been that it was all in the 'small print' stuff, if at all communicated.

"I do feel what has been relayed to me is against the spirit and intent of the original set-up of [the act] and subsequent amendments."

Around 75,000 people will be eligible to withdraw their savings from KiwiSaver in the first year of eligibility which starts on July 1, with 17,500 eligible in July.

Just six weeks out from when the first savers can begin to apply for their money the Government's KiwiSaver website has no detailed information about how long it will take savers to get their money out.

It states that when a person is eligible they should apply to their KiwiSaver provider.

A quick check of the largest providers showed little or no information about withdrawing money from KiwiSaver once a person is over 65 and has been in the scheme for five years.

David Boyle, general manager of funds management for ANZ Wealth, which manages the OnePath KiwiSaver money said it had not rushed to get information out because there was nothing people could do until July 1.

Boyle said OnePath would write to all its members who became eligible two weeks ahead of their eligibility date about the process involved.

He said people needed to realise KiwiSaver was not like a savings account.

Those wanting to get their money out have to complete a withdrawal form and a statutory declaration which must be witnessed.

Boyle said he expected to get OnePath's withdrawal form on its website by the end of May once it had sign-off from its trustee company.

"But we can't start the process until the member has met the eligibility requirements."

The date a person becomes eligible depends on how they signed up.

Someone who went through their employer has a start date based on when their contract was formed between the provider and the saver, usually three months after joining, or when the first contribution is received, whichever is sooner.

The Inland Revenue generally only receives money from an employer once a month so that contribution date is based on the 15th of whatever month the first contribution was made.

However, the first people eligible to get their KiwiSaver funds must also wait for their provider to claim their member tax credit from the tax department before receiving their money. Providers can apply only from July 1.

Boyle said the Inland Revenue typically took three to five working days once the tax credit claim was made to pay out the money.

"We should be looking at five to 10 days to pay the vast majority of money out," he said.

But some workers who have kept contributing may also receive a later payment from the Inland Revenue for employer and employee contributions made in June.

Boyle said OnePath members who were eligible to withdraw their money would have the option of taking it all out, receiving a regular payment or leaving it in.

Boyle said as the largest provider OnePath had a bubble of people becoming eligible in the first few months but he did not expect any problems.

THE RULES

* Savers can apply to their KiwiSaver provider once they become eligible from July 1.
* Savers are eligible once they have been in the scheme for five years and are over 65.
* Must fill out a withdrawal form and a statutory declaration which must be witnessed.
* Those eligible in July will have to wait for their provider to claim the member tax credit from Inland Revenue which is expected to take five working days.
* The eligibility date is based on when the contract was signed with the provider or when they received the first contribution, whichever is sooner.