Helen Twose: KiwiSaver is money of last resort in cases of hardship

Early access to KiwiSaver is, understandably, limited. Photo / Getty Images

Q: Early withdrawals from KiwiSaver on hardship grounds is a can of worms. I applied for a partial early withdrawal because I am out of work and had dental and car repair bills to pay off. However, the provider eventually got back to me and said part of my request - mortgage payments - had been approved but not the credit card bill. It was considered personal debt. I pointed out the only other option for many would be to go to Winz. But if they wanted to use other money before applying to the state for assistance that could hardly be considered incurring personal debt.

A: Nearly 11,000 people successfully applied to withdraw money from their KiwiSaver in the year to June.

That's a 30 per cent up on the previous year, with each person taking out on average $5565 - 11 per cent more on average than the year before.

Early access to KiwiSaver is, understandably, limited. The hardship rules are set out in the legislation and managed by the providers with the independent trustees - now called the supervisor - making the decision.

Vanja Thomas of KiwiSaver supervisor Guardian Trust says the test is reasonably difficult to apply and involves subjectivity. "A person must be suffering, or likely to suffer, from significant financial hardship."

Criteria includes being unable to meet minimum living expenses, including food, shelter and medical care.

Guidelines from the industry organisation Workplace Savings NZ suggest basic living costs could include a reasonably priced telecommunications package including broadband, essential dentistry, repairs to an economical, low-cost car and basic Sky deals in some circumstances.

"The member must demonstrate they have a shortfall between income and expenditure and must also show they have explored and exhausted any reasonable other sources of funding, including Winz, if applicable. KiwiSaver funds are very much a last resort."

Applications require a detailed financial break-down, says Thomas. Getting budget advice first may help and demonstrates you've tried to sort things out. "Having a debt does not automatically entitle a member to withdraw KiwiSaver money."

The rules are simple on a mortgage but other debt is less clear. "The general approach is to allow an amount to pay for bills and living costs but not credit card debt other than, in some cases, the minimum payment due and arrears."