KiwiSavers forced to dip into their funds

Thousands have made more than one withdrawal for hardship reasons

Over 15,000 Kiwis have made more than one withdrawal from their KiwiSaver account for hardship reasons since the scheme began.

Inland Revenue figures show 15,081 members have been forced to dip into their retirement savings on multiple occasions because of financial hardship in the past 10 years.

A total of 60,495 hardship withdrawals have been made since KiwiSaver began in July 2007, with $ 272 million withdrawn.

That’s only a small proportion of the 2.7 million people in KiwiSaver, but the number applying is growing.

In May, more than 1500 people took $ 9.2m out of the scheme — the biggest monthly withdrawal so far.

An IRD spokesman said while the yearly tally of financial hardship withdrawals had been increasing slowly, so had overall KiwiSaver membership.

“The ratio of withdrawals to membership has been fairly consistent for the past five financial years,” he said.

Those applying for hardship must meet strict criteria, including having to show they are unable to meet dayto- day living expenses or make mortgage repayments, to the point where the funder is calling in the loan.

Mark Jephson, general manager of corporate trusts at Guardian Trust, which handles hardship claims on behalf of KiwiSaver providers, said some people came back for a second application because their financial circum- stances had not improved after the first payout.

As a general rule, he said, it only paid out enough to cover 13 weeks of living costs for the first application, as that was the t ypical stand- down period for certain benefit payments from Work and Income.

“Often their circumstances haven’t really changed after that so they will submit another full application.”

The second time a person applied, he said, it looked for evidence that they had taken some budgeting advice since the first application.

“We want to see they have taken steps to alleviate hardship.”

Jephson said he did not believe the number applying more than once for their KiwiSaver savings signalled a problem with the scheme.

“It’s more a social i ssue than a KiwiSaver issue,” he said.

“There are people in hardship out there.”

June- Lily Holyoake, manager of the Pakuranga and Howick Budgeting Service, said many people were

asking how to get access to their KiwiSaver money.

“It is a regular thing people do. They are looking at it and might have $ 30k and think I need that money now.”

But she said KiwiSaver should be the last port of call.

Holyoake said those who took their KiwiSaver money out now potentially faced a tough retirement and may have to work longer — a challenge for people in manual jobs.

“We would want it to be the last port of call. But a lot of people can’t afford it.”

She said one option was for people to take a contribution holiday.

Holyoake said the service encouraged people to fill out hardship applications themselves to understand how much work was involved.

“That means they might think twice about it.”

In her view, said Holyoake, some people should not be in KiwiSaver because they did not have any money to save.

Rob Mitchell, a budget adviser at the Papakura budgeting service, said some people applying for a second application had not learned the lesson the first time round.

“Sometimes the request for funds isn’t allocated to where it should be.”

Mitchell said the service did everything it could to try to find another solution, rather than people taking their money out of KiwiSaver.

“Because that is their long- term savings.”

But he said budgeting advice could only provide people with a choice.

“At the end of the day you can’t force it on them.”

Mitchell said hardship applications were on the rise and rent arrears was a common theme among those applying, particularly in Auckland.

KiwiSaver’s architect, Sir Michael Cullen, recently said the scheme should be made compulsory to prevent widening inequality at retirement between those who join and those who do not.

But the Government has said it will not force people to join the scheme because it believes individuals should choose what to do with their money.