Q When can you draw down on your Kiwisaver funds in an emergency? What are the different scenarios?
A There are several emergency situations which allow investors to apply to withdraw some or all of their contributions before the age of 65 (and having been a member for at least five years).
If a person dies, then their executors or representatives apply to the Trustee of the Scheme to withdraw the funds. The manager of the fund will pay out the entire value of the investment to the estate and will close the KiwiSaver account.
If a person is diagnosed with a serious or terminal illness, they can apply to the trustee to withdraw their investment - including the Government contributions, their employers and their own. The KiwiSaver Act 2006 defines serious illness as "an injury, illness or disability (a) that results in the member being totally and permanently unable to engage in work for which he or she is suited by reason of experience, education or training or any combination of those things; or (b) that poses a serious and imminent risk of death".
If you find yourself in this unfortunate situation you will need to fill out the "Application for Withdrawal of KiwiSaver Contributions" form, available from your fund manager or financial adviser. One page of this form has to be filled out by your GP, giving details of your illness or disability. The form has to be signed in front of a Justice of the Peace or other person authorised to take a statutory declaration.
A person may also apply to withdraw funds because of "significant financial hardship". In this situation, only their own and their employer's contributions are able to be withdrawn, not any Government contributions.
Significant hardship can be difficult to prove, and the fund trustee may only pay out the amount they feel is required to alleviate the hardship. Again, an "Application for Withdrawal of KiwiSaver Contributions" form must be filled out, in this case giving information of assets and liabilities and also providing evidence that other avenues have been tried. They also ask for information on previous withdrawal applications you have made.
If your hardship claim is successful your KiwiSaver scheme will not be closed, as the Government contributions will remain there until you reach eligibility age (usually 65). If you are working or return to work, unless you take a contributions holiday your contributions can continue.
It is not easy to get cash out of KiwiSaver, as it is designed for long-term retirement savings. In the case of financial hardship, it should be a last resort.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free by calling 8703838. The information contained in this article is of a general nature and is not intended to provide specific or personalised advice. If readers have any KiwiSaver questions they would like answered, please go to www.peak.net.nz or email shelley.hanna@peak.net.nz