Q I have always thought I am quite good with money, but my husband has been off work due to illness and we aren't coping very well on my salary alone. He is a self-employed tradie. We've stopped his KiwiSaver contributions, and now we are wondering if we can make a financial hardship application. We have been keeping up with our mortgage payments, but other bills aren't getting paid. How much can we expect to get if we apply to withdraw some money?
A The main purpose of KiwiSaver is to save for retirement, and it is not easy to get money out of KiwiSaver before the age of eligibility which is currently age 65.
If your debts are putting you into a situation of extreme hardship – for example if you are unable to meet minimum living expenses or at risk of a mortgagee sale – then you may be able to make a Significant Financial Hardship (or SFH) withdrawal. This is an application to the KiwiSaver Trustees to make a withdrawal to alleviate hardship. They only allow this in cases of extreme hardship, and not just for debt repayments. You must prove that you have explored other options in your application.
There is also an option for members to make a withdrawal if they have suffered an illness, injury or disability that permanently affects their ability to work or poses a risk of death. If this does not fit your situation, then you should consider the SFH option.
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Each KiwiSaver manager has their own lengthy SFH application form and they ask for a great deal of background information. It is not a quick process. It is very important to answer every question, in particular with regards to assets and debts. The Trustees of your KiwiSaver Scheme need a clear explanation of what brought about the situation – it can't be through your own negligence. Because your situation has come about due to an unexpected health crisis, it may be looked upon more favourably.
You will need to provide your current financial income and outgoings in the budgeting section of the form and clearly outline what you intend to use the released funds for. It is a good idea to talk to a financial mentor at your nearest budget advisory service. They can help with the application process.
Their help is free, but it may take a few days to get an appointment and it may take more than one appointment to gather all the information you need. The financial mentor will also be able to look at your budget and make recommendations about cutting costs or applying for benefits from MSD. They can also help you negotiate with creditors and set up a repayment plan that is manageable for you.
If you go down the SFH route, there is the option of asking that the funds released from your KiwiSaver be paid directly to creditors. The Trustees may look more favourably on such an application, as they will be confident that the funds will be correctly allocated and not spent or squandered elsewhere.
Once the SFH form has been filled out and all the information gathered it needs to be signed as a Statutory Declaration in front of an authorised person such as a JP or solicitor. It is up to the Trustees to decide if and how much they may pay out.
- •Shelley Hanna is the communications manager with Peak Portfolio Management Ltd which is a Financial Advice Provider licensed by the Financial Markets Authority. Disclosure information is available at www.peak.net.nz or call 06 8703838. The information provided in this article is of a general nature and should not be relied on as a recommendation to invest in a financial product. Send your KiwiSaver questions to email@example.com