KEY POINTS:
Just over a year since inception and more than 10,000 people have already applied for leave from KiwiSaver on hardship grounds, according to the latest Inland Revenue Department (IRD) figures.
Media reports have speculated that this statistic reflects the impact of the financial crisis spilling out into the 'real' economy, as experts like to describe our daily humdrum existence.
There is something to that argument. In its first annual review of KiwiSaver, the IRD reported about 3,500 financial hardship KiwiSaver holidays as at the end of June this year - so the increase in the intervening months has been substantial.
But what surprised the IRD was that almost two-thirds of those on a financial hardship holiday were still contributing to KiwiSaver. It had two boring explanations for this: administrative time-lags, and; the possibility that the hurdles for 'financial hardship' relief were set too low.
The exciting prospect floated by the IRD, however, was that KiwiSavers on hard-up holidays were playing the odds.
"... it is possible that individuals are 'gaming' the system by applying for a holiday so that they are no longer required to contribute a set amount at set intervals, but are continuing to contribute to take advantage of the member tax credit," the IRD report says.
"This explanation is particularly plausible when the dollar amount of contributions made by those on holiday is considered. Nearly all (98%) those who have contributed, have contributed a dollar value up to, or equal to, $1,042.86; the threshold for a maximum member tax credit claim."
This is brilliant news. If true, it proves that New Zealanders are not as financially incompetent as they are often painted - it takes a bit of nous to manipulate a system.
Expect more to play this game. While the focus has been on the hardship holidays, after one year in a scheme everybody is able to go on a KiwiSaver break.
David Chaplin
