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KiwiSaver withdrawal process 'should be easier'

There are calls for New Zealand to follow Australia’s lead and make it easier for those affected by Covid-19 to access KiwiSaver savings.

Thursday, April 9th 2020, 6:05AM 2 Comments

Richard James

In Australia, people who are struggling because of Covid-19-related disruption have been allowed to access up to A$10,000 of their super before June 30 and another $10,000 between July and September.

Richard James, former chief executive and now director of NZ Funds, said New Zealand should do something similar.

He suggested it be made easier to withdraw up to $20,000 of KiwiSaver money.

He said he did not agree with earlier advice from the Financial Markets Authority and Retirement Commissioner that it should be seen as a last resort option.

“I think it’s probably going to be an inopportune time to take money out. But the hardship process is very difficult. It seems like an obvious thing to do in these extraordinary circumstances.”

James said it seemed cruel for people who had suffered a big income drop to have money in an investment, which they could not access.

“The only way KiwiSaver providers can help is by making the hardship process as simple as possible.

“I think there will be people who for example may not lose their jobs but their income will be cut to 80% and their hours are cut but they have a mortgage to pay. Do you want to lose your house or dip into savings? I know what I’d do. If we get to 10% unemployment there will be tens of thousands of people in that situation.”

Allowing members to access 20% of their current balance would free up $10 billion of money to help New Zealand families without any extra government funding.

While your circumstances may qualify for withdrawal under significant financial hardship, taking out money now may severely impact your quality of life in retirement later,” Retirement Commissioner Jane Wrightson said. “There is a lot of other help available you could access before going down that road.”

She said people could check they were getting the full support available from the Government, could ask for support from their bank or advice from helpline MoneyTalks.

“Avoid making a decision based on fear,” says Wrightson. “Emotional situations tend to lead to poor financial choices, so access the help above before turning to the long term savings and investment that is your KiwiSaver. You will not only crystallise the losses your fund has suffered since the effects of Covid-19 began, but also lose out on future returns.”

Commerce Minister Kris Faafoi said KiwiSaver provided an important means of investment to help people finance their retirement.

“I would urge anybody facing financial pressures to access assistance the Government has set up through the wage subsidy and other initiatives, also seek financial advice through their KiwiSaver provider, bank, and/or budgeting services to see what other options might exist to help them to get through this emergency before having to draw on their retirement investment. If at all possible it is best if KiwiSaver hardship withdrawals remain a last resort.

“It is, therefore, important to maintain existing processes for significant financial hardship applications to be assessed. However, I support the Financial Markets Authority guidance to KiwiSaver providers to be flexible with hardship withdrawal application requirements for things like making lawyers available to witness a statutory declaration by virtual methods, or accept other ways of obtaining verifications.”

The FMA said KiwiSaver providers and supervisors and their industry groups had established simplified processes for hardship withdrawals for New Zealanders who decide they do need to proceed with a hardship application.

“We have supported this work with guidelines outlining alternatives to normal methods of verification during the Covid-19 level 4 restrictions. These will be distributed directly to KiwiSaver providers and supervisors, and key industry and consumer stakeholders.”

Tags: Covid-19 Jane Wrightson KiwiSaver Richard James

« Covid withdrawals possible 'but not always desirable'CareSaver: Active management doing what it should »

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Comments from our readers

On 9 April 2020 at 10:37 am Murray Weatherston said:
The reporting above concentrates on the identity verification parts of the FMA response.

Here are excerpts of FMA's response in their bulk email today re the steps an applicant has to take to convince their supervisor to release funds under Covid hardship

"We think it is important to take what steps can be taken to verify the …….financial circumstances of an applicant. For that reason, we want providers to work with potential applicants to first point out other options that might be preferable to a significant financial hardship withdrawal, but to proceed where providers are comfortable they know……….. the facts of their financial circumstances.
4. (a) The application includes information and relevant evidence of the applicant’s assets and liabilities consistent with the level of detail set out in TCA’s [simplified] application form ………….

(b) The provider has confirmed that the applicant has explored and exhausted government support and assistance from the applicant’s bank.
The information and evidence in 4(a) and (b) is necessary to enable the supervisor to assess whether the significant financial hardship grounds in the KiwiSaver scheme rules are met and how much to withdraw in accordance with TCA’s COVID-19 assessment and preparation guidelines."

Clearly Richard's private email to the Minister and some of our earlier comments on this subject on Good Returns have had no effect.
On 9 April 2020 at 11:02 am w k said:
what's the definition of good customer outcome again?

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