KiwiSaver Hardship Withdrawal
Many of our clients now come to the budgeting service with the express intention of accessing KiwiSaver funds. For many it is the ‘pot of gold’ that they could use to reduce debt, meet living expenses or use for some other purpose.
The criteria for meeting financial hardship vary between different KiwiSaver providers, but in general money will not be paid out if the client cannot provide sufficient evidence of significant financial hardship. Significant financial hardship means that you do not have sufficient income to cover essential expenses.
KiwiSaver withdrawals can also be applied for if a client:
- is unable to meet mortgage repayments on the home they live in, resulting in their mortgage provider enforcing the mortgage on their property
- needs to modify their home for a disability
- needs to pay for medical treatment
- is suffering from a serious illness
- is incurring funeral costs if a dependent family member dies.
Each KiwiSaver provider has different requirements as to what information they require from the client, so it is important that you use the providers withdrawal form (normally available on their website). At a minimum they require a budget, and a list of your client’s assets and liabilities.
Significant financial hardship does not include repayment of debt but does include contracted repayment of debt (e.g. credit contract for an essential item).
A client can withdraw up to the current value of their contributions and their employer’s contributions but cannot withdraw any government contribution.
Interestingly many KiwiSaver providers recommend that anyone wanting to withdraw funds from their KiwiSaver should first work with a financial mentor to determine that:
- all other options to meeting living expenses have been explored
- the implications on retirement due to early withdrawal of funds has been discussed.
Financial mentors should not automatically assume that a KiwiSaver Hardship withdrawal is the best or only option for a client.
If a client expects to receive money from their KiwiSaver provider, it is very important that the money is used wisely, there have been many reports of money used for things other than meeting living costs or repaying debt.
Some notes about KiwiSaver hardship withdrawal:
- hardship is given only if income is insufficient to meet expenses. You cannot justify getting hardship to repay debt
- hardship withdrawal forms must be filled in and completed by the client – financial mentors are not allowed ‘to put a mark’ on the form. If a situation is complex, you can consider providing a budget worksheet or letter that the client can include in their application
- clients often do not receive the amount of hardship that they ask for – the amount is determined by the provider based on the information provided by the client.
Here is a document you can download that includes an article excerpt from MoneyHub.co.nz which provides valuable guidance on preparing an application for a KiwiSaver Hardship withdrawal.