HomeStart grant and KiwiSaver withdrawals can be used for deposits, provided conditions are met.
Under the Government's newly introduced HomeStart grant scheme, if you purchase a newly built home, a property bought off the plans or land to build a new home on, that entitles you to a higher grant, provided certain eligibility criteria are met.

This is all fine and good. However, when I recently contacted my KiwiSaver provider to withdraw my money to help with the 10 per cent deposit required to be paid to the developer, I was told they could not make any payments until settlement date. Settlement will only occur upon completion of the construction of the apartment, and once compliance and titles are issued.

So how is this new incentive meant to help first-home buyers purchase off the plans if they do not have the 10 per cent deposit? This seems to go against the intention of the KiwiSaver withdrawal scheme, which is to help with the deposit for purchasing a new home.

Hold your horses!

While Housing New Zealand doesn't run the KiwiSaver first home withdrawals - so it can't answer for what a provider does - Iain Duncan of Housing NZ points out that the recent changes to encourage the purchase of newly built homes come into effect from June 1.

These changes "will allow the savings withdrawal funds to be paid to assist with the deposit, especially for those properties that are off the plans or house and land packages", he says.

Duncan also gives information about the KiwiSaver HomeStart grant - previously called the first home subsidy - which is run by Housing NZ. As you've said, the grant is higher - up to $10,000 instead of $5000 - if you buy a newly built home. That's up to $20,000 for a couple, which is not to be sneezed at.

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"If the reader is eligible and is buying a property off the plans or a house and land package, then the grant can be paid to assist with the initial payment required under the agreement that they have signed with the developer/agent to secure the purchase," says Duncan.

"However, it should be noted that these funds will need to sit in trust or escrow until the settlement date of the property."

Ask your provider about changes scheduled for June. I think the provider should have volunteered that information anyway, the first time you asked. If they're not more helpful this time, I suggest you switch providers. That's poor service.

Good luck with setting up a first home purchase soon.

Guardianship rules

About guardianship for KiwiSaver, maybe the parent can prepare a statutory declaration witnessed by a justice of the peace, stating that she has sole guardianship of the child.

From what I understand these statutory declarations can be upheld in a court of law.

Maybe worth using this idea with your legal friends, providers and the IRD, etc.

Thanks for the idea, but it sounds too open to abuse by a parent wanting to shut out the other parent.

For those who didn't see last week's column, a mother said she can't sign up her young daughter to KiwiSaver because the provider insists on having the father's consent as well. But, the mother says, the father left for Australia as soon as the child was born and has taken no role in her upbringing.

I asked last week for lawyers to suggest a solution to this. And Clinton Light, a lawyer with Young Hunter in Christchurch who does family law work, has responded. Firstly, he clarifies the legal position.

"The issue is whether both parents have to sign an application for their child to join KiwiSaver," he says. "The requirement for all guardians (usually both parents) to consent is not in the Care of Children Act 2004, as IRD says, but instead in section 35 of the KiwiSaver Act 2006.

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"The Care of Children Act requires both parents to usually make joint guardianship decisions by consulting with each other, but sensibly this does not apply if it is not practicable. So it would not be practicable to consult with a parent that has no contact with the child - the situation in last week's letter.

"The problem is instead in the KiwiSaver Act. The rule is that if the child is under 16, then they need the consent of all of their guardians to apply to join KiwiSaver. If the child is 16 or 17, the child also has to consent, but only one guardian needs to consent.

"Parliament may have thought that this requirement was a good idea, but it does not recognise the reality that many children grow up in single-parent or divorced homes where getting the other parent's agreement is not straightforward," says Light.

But there's hope.

"The only solution in this case for a sole parent, where the other parent has no involvement or contact with the child, is to apply to the Family Court for the other parent to be removed as a guardian.

"I suppose it is possible to do this without a lawyer, but it would involve some paperwork. The Family Court website is a useful starting point for more information." Go to www.tinyurl.com/removeguardian

Light continues, "A lawyer would help an applicant navigate through the legal requirements for an order, such as serving the application on the other parent." But, he adds, "This is probably not going to be cost-effective just for the purpose of a child joining KiwiSaver!"

I suppose it depends how much you want the child to join. A community law centre may be able to help you through the process without charging an arm and a leg. See www.communitylaw.org.nz

Incidentally, an idea emerged this past week that could remedy this situation for the future, even though it wouldn't help parents currently wrestling with the problem. The Greens are proposing that all newborns automatically join KiwiSaver. However, that idea has lost some of its appeal now that the KiwiSaver kick-start has ended.

Banking stability tests

Your assessment last week of our future banking stability is reassuring. But does the Reserve Bank really know what it is doing? The stress tests applied to banks have been met with scepticism overseas. Few of us are able to judge their value.

It is obvious that there would be no value for the Reserve Bank to declare that some of our banks failed the tests. Do they have independent international auditors? I held accounts with an Icelandic bank and Anglo Irish in the past so I understand the reality of bank failure. I wonder how many Kiwis do?

Our Reserve Bank seems to be the only one, as far as I can ascertain, which has no gold reserves to fall back on in a crisis. Is this a case of "everyone except Jonny is out of step"?

When the Auckland housing crisis eventually occurs it is my opinion that any national financial crisis would lead to serious job losses, which in turn would place many in circumstances where they could not pay their mortgages, however prudent they were. Mortgagee sales en mass might prevail.

I suggest that we should pay heed to the old Wall Street advice: "Put 10 per cent of your assets in gold and hope it doesn't work!"

You could even bury the metal in the garden!

We've already discussed investing in gold more than once in this column - although those correspondents were inclined to put most or all their savings into the yellow stuff. A small allocation to gold - maybe 5 per cent - might not be a bad idea for some, as long as you're aware that it produces no ongoing return and the price can plunge as well as soar.

Moving to your main points, a Reserve Bank spokesman says, "The Reserve Bank's responsibilities include providing information to the New Zealand public on financial stability, bank regulation and many other matters.

"We work hard to ensure this information is comprehensive, well researched and backed up by hard data. What people make of this information is up to them.

"We do not share your reader's bleak views. We stand by our comments that the financial system is currently sound and operating effectively."

On your question about international auditors, he says, "We conduct the bank stress tests every three years in collaboration with the Australian Prudential Regulation Authority (APRA). There is a set of checks and balances inherent in this process.

"In general terms, the Reserve Bank is accountable to Parliament and has a board of directors that provides oversight and advice relevant to the Reserve Bank's operations."

What about gold reserves? You're right that the RB is not into gold. It hasn't held it since 1991.

"Our position is that gold does not meet our liquidity requirements. Gold also incurs storage and handling costs. Moreover the price of gold goes through very large cycles, making it a more risky investment than short-term government debt," says the spokesman.

And this is not a case of Jonny being the only one out of step. "A large number of central banks do not hold gold reserves."

As for your housing crisis scenario, the spokesman points out that it's speculative. "We repeat our comments from last week that the Reserve Bank was generally satisfied with how banks managed their way through the impacts of two adverse economic scenarios in the 2014 bank stress tests, which included a scenario similar to what your reader describes.

"We are comfortable that the New Zealand financial system is capable of withstanding a major adverse event, such as a collapse by up to 50 per cent of the Auckland housing market."

Want to hear it from the horse's mouth? On the Reserve Bank's website, you can see Governor Graeme Wheeler speak about these and other issues at the media conference held after last week's Financial Stability Report was published. For highlights, go to www.tinyurl.com/rbhighlights

Next week's column will include two readers' letters about the Reserve Bank's comments on what would happen "in the extremely unlikely event of a bank failure".

Kick-start ends

The end of the KiwiSaver $1000 kick-start in Thursday's Budget shouldn't change any adult's mind about whether it's good to join the scheme.

For people over 18, the tax credits of up to $521 a year still make KiwiSaver really hard to beat as a way to save for retirement. For many employees — especially those on lower incomes — their own savings are at least doubled each year by employer and government contributions. And with twice as much going into your account, you'll get twice as much out in retirement or to buy a first home.

It's different, though, for children under 18, who don't get tax credits.

There's no longer any incentive for them to join — unless they have generous employers who contribute even though it's not compulsory for under-18s.

However, parents may still find KiwiSaver a convenient place to start their children's savings for a first home. And there's probably an advantage in getting a child into the scheme so they're ready to pick up the ball when they turn 18.

• 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 website is www.maryholm.com. 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 mary@maryholm.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.