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KiwiSaver: hardship withdrawal not that easy

August 26, 2015


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26 August 2015

With so many people now in KiwiSaver, and average balances getting larger, it’s probably not surprising that the number of Kiwis trying to crack open their nest eggs early is on the rise. But with KiwiSaver being primarily designed for retirement saving, it’s also not surprising that accessing your money before age 65 is not that easy.

What’s the story?

Apart from a first home withdrawal, the other times you can apply to make an early withdrawal from your KiwiSaver account are:

  • when you permanently emigrate to a country other than Australia;
  • when you suffer serious illness;
  • to help you pay certain tax liabilities that may arise when you make a foreign superannuation transfer or withdrawal
  • and when you experience ‘significant financial hardship’.

How significant are we talking?

To apply for a significant financial hardship withdrawal, you will need to show you are experiencing significant financial difficulties resulting from any of these seven situations:

  1. Your inability to meet minimum living expenses.
  2. Your inability to meet mortgage repayments on your principal family residence resulting in the mortgagee seeking to enforce the mortgage on the residence.
  3. The cost of modifying a residence to meet special needs arising from a disability of you or of your dependent.
  4. The cost of medical treatment for an illness or injury of you or of your dependent.
  5. The cost of palliative care for you or for your dependent.
  6. The cost of a funeral for your dependent.
  7. You’re suffering from a serious illness.

These situations are specified in the KiwiSaver legislation, and apply to all KiwiSaver schemes.

Who makes the decision?

While your KiwiSaver provider will make the funds available to you if your application is approved, it is actually the trustee of your scheme who decides whether or not you meet the criteria for a significant financial hardship withdrawal.

How much could I get?

At the trustee’s discretion, you may be able to withdraw up to the total current value of your and your employer’s contributions. You cannot withdraw the $1,000 kick-start (if received) or member tax credits.

How do I apply?

Your KiwiSaver provider can provide you with application forms for all types of early withdrawal. If you are a member of the Kiwi Wealth KiwiSaver Scheme and you need to apply for an early withdrawal on the grounds of significant financial hardship, please contact us for the application form.

What will happen?

The trustee of your scheme will review your application and decide whether to approve it. The trustee may approve a partial withdrawal, rather than the maximum allowed, or may decline your application.

As well as being reasonably satisfied that you are suffering or are likely to suffer from significant financial hardship, the trustee will also need to be satisfied that reasonable alternative sources of funding have been explored and have been exhausted.

More information

You can find out more about making early withdrawals from KiwiSaver on our Kiwi Wealth KiwiSaver Scheme website, and on Inland Revenue’s KiwiSaver website.

Tags: KiwiSaver

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