KiwiSaver: Hardship withdrawals limited

Trustee companies decide whether KiwiSaver providers can let retirement savers access their funds early in times of financial hardship. Photo / Getty

Q: My wife and I are on a medical benefit and applied for a hardship withdrawal from my KiwiSaver, which came to $1,300. I have to wait another 13 weeks before applying again. I can't seem to get any sensible information (I would rather use my KiwiSaver as a top-up) as to what I can do other than being told to get into severe debt and have creditors knocking on the door, which we certainly want to avoid. As our medical condition is long-term, my wife and I are trying everything we can to manage on $175 each a week without getting ourselves into too much debt. We own our home outright and have a joint credit card. We have no other debts other than the normal electric, water, insurance and rates, although we have added medical expenses.

A: I put your question to Vanja Thomas, senior relationship manager in corporate client services with Guardian Trust.

Trustee companies such as Guardian Trust decide whether KiwiSaver providers can let retirement savers access their funds early in times of financial hardship.

"The KiwiSaver early withdrawal grounds are limited because the scheme is there to encourage long-term savings," says Thomas.

"We work within strict legislative parameters set out in the KiwiSaver Act. A part of the trustee's job is to decide whether an application for significant financial hardship or serious illness meets the requirements.

"From the information provided, it's likely that the member has originally applied on the grounds of their inability to meet minimum living expenses (the 'basics' of life, including food, shelter and medical care). This is part of the significant financial hardship test.

"In the original applications, the member must have demonstrated that they have a shortfall between income and expenditure and a partial withdrawal of $1300 was approved to cover the deficit. The member would also have shown that they have explored and exhausted any reasonable other sources of funding. KiwiSaver funds are a last resort.

"The member ... may have already considered whether early withdrawal on the grounds of serious illness is available. To meet this test the medical condition must render the member totally and permanently unable to engage in work or it must pose a serious and imminent risk of death.

"If the member doesn't meet the statutory test for serious illness, and wishes to have the significant hardship application reviewed, then he or she can request this via their KiwiSaver provider.

"If ... there is medical information that wasn't previously considered this may result in a further release of funds. The KiwiSaver provider will also be able to give information about what a member can do if they are not satisfied with the review, including contacting the trustee and the dispute resolution provider," says Thomas.