'The most dangerous thing you can do is get off the rollercoaster halfway through the ride' - KiwiSaver expert Tom Hartmann
KiwiSaver fund managers are asking regulators to ease the documentation required to access hardship withdrawals, with inquiries surging as the Covid-19 global crisis floors the New Zealand economy.
BusinessDesk understands the Ministry of Business, Innovation and Employment is investigating ways to make the application process easier during the level 4 alert lockdown.
The moves come as KiwiSaver fund managers also report a 10-fold increase in the number of people switching from one kind of fund to another, with a massive shift away from higher risk 'growth' funds and into low-yielding cash funds.
Blair Vernon, chief executive of AMP's New Zealand Wealth Management, said the firm has seen a huge surge in hardship inquiries, though few new applications.
"In order to apply there is a lot of documentation, which has to be verified by a statutory declaration – such as a Justice of the Peace. But that won't be possible during shutdown," he said.
"What we are doing, along with other advisers, is seeking relief from the regulators about some of the documentation requirements that are usually required to accompany hardship withdrawal."
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Hardship applications made in the past month are still being processed, Vernon said. But the social distancing order would likely make new applications difficult.
"We don't want people to be unable to access their funds if they are in genuine hardship," he said.
Hardship is defined as not being able to meet your living expenses and rent or mortgage payments. Serious illness or medical expenses can also be eligible as hardship.
The government has implemented a wage subsidy scheme for employers and the banking sector is rushing to implement a mortgage payment holiday system to take the financial pressure off firms and households and to try and save jobs.
However, surging unemployment is widely anticipated, with Finance Minister Grant Robertson yesterday leaving open the possibility that unemployment could jump above 10 percent. One economist suggests 30 percent is possible.
Accessing KiwiSaver money requires completing a statutory declaration about assets and liabilities, as well as proving you have explored other options for funding.
AMP's New Zealand chief executive Blair Vernon says KiwiSaver financial hardship claim rules need to be relaxed. Photo / file
Melissa Vasta, Kiwi Wealth head of product, said she had not yet seen a significant increase in hardship requests but was expecting one as the fallout from the virus continued.
"It's early days, and it's likely we'll get more of these in the coming weeks and months," she said. "We'll be helping members work through the best options available to them which may include accessing other financial support recently made available by the government."
Regulators have already relaxed anti-money laundering rules while the country is in lockdown. The recently-imposed stringent checks, which require face-to-face verification of original documents, are no longer possible with social distancing requirements.
BusinessDesk understands similarly relaxed measures could be put in place for those needing to access KiwiSaver funds. MBIE was approached for comment, but had not responded by deadline.
Separately, fund managers have also noted a dramatic increase in investors changing their risk profile over the previous week.
AMP's New Zealand Wealth Management and Kiwibank's Kiwi Wealth both said they had seen a 10-fold increase in switches from growth to cash funds.
Vernon said the sudden volatile trading had caused investors to rethink their appetite for risk after experiencing the first big downturn in a decade.
"People can't truly grasp how lacking in tolerance they are to huge volatility until they experience it," he said.
Fisher Funds chief investment officer Frank Jasper said he had seen a notable uptick in switch requests, although it was still only a "few hundred or low thousands" of the firm's 240,000 clients.
"Anecdotally, there are definitely some people who have fallen into the panic category and have made fairly rash decisions to change strategy," he said. "Then the next day when the market bounces back they are somewhat reticent about the decision."
Jasper said panic was understandable after seeing some of the fastest share market drops in a century but switching funds had trailed off after stock markets have seen upwards movement in recent days.
