Q. I would like to withdraw funds from my ASB KiwiSaver account as I'm now unable to work and soon will not be able to meet my loan repayments. I'm only just going to be able to manage my mortgage but not the loans on top. I had these under control when I was working, but my circumstances have changed. My question: how far in debt do I have to go before I can request a withdrawal? I do not want to end up with a bad credit rating. I cannot add the debt onto my mortgage because the mortgage is a Welcome Home loan.

A.

As you probably know, the rules around making withdrawals from KiwiSaver are very strict. Unless you are over 65 or applying to buy your first home, it is not easy to get money out of your KiwiSaver account. This is because the primary purpose of KiwiSaver is to make your retirement more comfortable, rather than provide funds in an emergency.

However, the KiwiSaver Act 2006 does make provision for Significant Financial Hardship. According to the legislation, "significant financial hardship includes significant financial difficulties that arise because of a member's inability to meet minimum living expenses; or a member's inability to meet mortgage repayments on his or her principal family residence resulting in the mortgagee seeking to enforce the mortgage on the residence; or the cost of modifying a residence to meet special needs arising from a disability of a member or a member's dependant; or the cost of medical treatment for an illness or injury of a member or a member's dependant; or the cost of palliative care for a member or a member's dependant; or the cost of a funeral for a member's dependant; or the member suffering from a serious illness.

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The trustees must be reasonably satisfied that reasonable alternative sources of funding have been explored and have been exhausted; and may direct that the amount withdrawn be limited to a specified amount that, in the trustees' opinion, is required to alleviate the particular hardship."

It sounds like you will be making a withdrawal on the grounds that you are unable to meet your living expenses. However, it is not your basic living expenses that you cannot afford, it is your loan repayments. It will be up to the trustee of your KiwiSaver scheme to decide whether you meet the criteria for a significant hardship withdrawal. You can only apply to withdraw your own and your employer contributions, not any Government contributions.

The Significant Financial Hardship Application form asks that you provide evidence of hardship and proof that that you have exhausted other avenues. You can go to a Budget Advisory Service to get assistance with your KiwiSaver withdrawal application at no cost to you. While you are there your budget will be examined to clarify your current financial position and this may be helpful to you in your changed circumstances. A budget adviser can negotiate with lenders on your behalf and make other suggestions to help you through this difficult period.

Evidence that you have sought budget advice can help your application. Local budget adviser Paul regularly sees clients wishing to make a KiwiSaver Financial Hardship application. He warned that in his experience "KiwiSaver providers do not necessarily oblige with a withdrawal for loans, unless the cause of the loan was for some exceptional circumstances".

Here is a statement from ASB that provides some advice as to what readers can do to improve their chances of making a successful application for a significant financial hardship withdrawal: "It's important to provide plenty of evidence to support your application. So a key step a KiwiSaver member can take to improve their chance of a successful application is to provide sufficient evidence of their current household financial position - as outlined in the significant financial hardship application form; and application for assistance from WINZ/Working For Families (if relevant) and the amount of any assistance granted or declined."

• Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz.