Kiwisaver: Owning house in UK could be hurdle to withdrawing funds

There have definitely been some changes to KiwiSaver since it was introduced but apart from a few minor tweaks the rules for first-home buyers have remained fairly untouched. Photo / Thinkstock

I think it's a lost cause but worth a shot! My wife and I emigrated from Britain about six years ago. I set up KiwiSaver about five years ago and at the time I was told it could be used for a deposit on my first home in New Zealand so I contributed at 6 per cent, knowing that in five years I would also unlock 49 per cent of my UK pension so the two joined would give me a relatively good deposit.

Since then the house market has taken off like a rocket and the rules have changed on getting access to KiwiSaver funds.

My situation in summary is this: I earn about $98,000 a year and my wife earns $25,000, therefore we are over the threshold of $120,000.

I also have a house in the UK. This is in the north of England where the housing market is stagnant and not moving (I currently rent it out, breaking even on mortgage payments and upkeep). So my question is: Is there any way I can get access to the funds I and my employer have put in? I would not expect the government contributions.

My KiwiSaver fund currently is $25,000 plus and this would mean a big difference in getting a home loan.

There have definitely been some changes to KiwiSaver since it was introduced but apart from a few minor tweaks the rules for first-home buyers have remained fairly untouched.

Essentially, anyone who hasn't owned a home before, has been a member of a KiwiSaver scheme for at least three years and wants to buy a house they plan to live in can apply to their provider to withdraw their contributions, those made by an employer and any investment earnings.

From next week - April 1 to be exact - any member tax credits received can also be taken out with only the $1000 kick-start and any superannuation savings transferred from an Australian retirement savings fund into KiwiSaver needing to remain in your account.

I asked Westpac's head of investment products, Nigel Jackson, about your situation.

"This is a bit tricky as it depends on how you apply the requirements of the KiwiSaver Act to land ownership in other countries," Jackson says.

"Generally, if you already own an 'estate in land' as defined by the KiwiSaver Act, you are not eligible to make a first-home buyer withdrawal.

"There are some exceptions around the land ownership being in a bare trustee or leasehold structure, but since you appear to have full title/ownership of your UK house (that is, are renting it out and making mortgage payments), it would seem these exceptions would not apply.

"However, if you have owned a home before but no longer do (ie, you sold your UK property), and want to access your KiwiSaver to purchase your first home in New Zealand, in some circumstances you may still be eligible to withdraw your savings.

"Your scheme provider may require you to contact Housing New Zealand to determine if you're in the same financial position as a first-home buyer," Jackson says.

As Jackson points out, Housing New Zealand makes a call on whether someone who has owned a home in the past but no longer does so and is in the same financial position as a first-home buyer can get their KiwiSaver funds out.

Housing New Zealand will base its assessment on things such as your income level, which needs to be under $120,000 for a couple or $80,000 for an individual, and the assets you own, including anything from classic cars and expensive boats through to term deposits and shares.

It will then recommend to your provider whether the funds can be released.

More information on KiwiSaver withdrawals for previous home owners can be found on the Housing New Zealand website.

Questions
To have your KiwiSaver questions answered by the Herald's panel of industry players email Helen Twose, helen@helentwose.co.nz. Sorry, but Helen cannot answer all questions, correspond directly with readers, or give financial advice.

Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.