Times are tough for many Kiwis right now, with high inflation, rising mortgage rates, and more job redundancies hitting our wallets hard. If you’re struggling to make ends meet, have you considered whether a KiwiSaver financial hardship withdrawal could help you get back on track?

If you are one of the many New Zealanders who are experiencing some difficulties, you may be eyeing up your KiwiSaver funds as a potential saving grace. If you have no other options, KiwiSaver for Financial Hardship could be an option for you.

Before we get into the details about financial hardship though we do need to warn you it is not an easy process. To get your financial hardship application approved we will need to go into a huge amount of detail, though this is required to satisfy our Supervisor, Public Trust who are the ones that will make the final decision.

Here are some common examples of Financial Hardship Withdrawals:

• People lose their jobs and struggle to meet mortgage or credit card repayments
• Unexpected bills arise that clients need help with (eg. Medical Bills, Car Repairs, House Repairs, Funeral Costs for family members)

Here are some less common examples for Financial Hardship Withdrawals

• Paying for a new car so that a client can travel to work every day (there was no other option)
• Assisting a client pay to move into emergency housing

What can I use it for?

Financial hardship can be used from everything from making overdue debt repayments, paying your rent all the way through to paying for your car to be fixed so that you can go to work. The key is proving that you need the money and that you have no other way of solving your problem.

Some common reasons why applications are declined are:

• Clients refuse to give us the information needed to get to our decision (as you will find out below) it can be onerous
• We help the client find an alternative option (asking lenders to delay payments / restructure their debts
• We see other assets that can be used to help out. We have seen clients a few times, refuse to sell shares in Sharesies accounts!

How much will I get.

If your application is successful, you can withdraw up to the value of the contributions that you and your employer have made (including investment earnings). You cannot withdraw any contributions the Government has made (e.g., $1,000 kick-start and Government contributions).

• 13 weeks worth of living expenses that you cannot afford to make
• The value of your overdue debts that you are unable to restructure
• If you have large mortgages or credit cards, we will not pay off those debts, we will simply pay off the amount outstanding and in arrears, lots of people think we will pay of all debts, but we will only pay the amounts that are outstanding.

Other Alternatives to Consider First:

Consider seeking budgeting advice or financial counselling to thoroughly assess your financial situation. These resources can assist you in developing strategies to manage your expenses, prioritise debts, and potentially free up funds without jeopardising your retirement savings. Additionally, look into government assistance programmes and support services that may offer temporary relief. By taking the time to review these options, you can make a well-informed decision that balances your immediate needs with your long-term financial security.

List links to alternative options here:

• WINZ
• Job Seekers
• Food Grants
• Temporary and Additional Support
• Special Needs Grants

Check out https://www.moneyhub.co.nz/hardship-assistance.html#hardship for further advice on alternative support options.

How to Apply for Financial Hardship Withdrawal

Steps:

1. Contact us to get the application form.
2. Submit necessary documentation proving financial hardship.
3. The provider’s supervisor reviews and makes the final decision.

To apply for a financial hardship withdrawal from your KiwiSaver, start by contacting your KiwiSaver provider to request the application form. Once you have the form, gather and submit the necessary documentation that demonstrates your financial hardship, such as proof of income, bills, and any relevant correspondence. After you submit your application, it will be reviewed by the provider’s supervisor, who will make the final decision regarding your withdrawal request. By following these steps, you can ensure that your application is processed efficiently and effectively.

Please remember All KiwiSaver schemes follow the same method for Financial Hardship withdrawals, there is no provider that allows ‘simpler alternatives.

Consequences of Withdrawing Early

Taking money out of your KiwiSaver fund today will inevitably lead to a lower balance in the future, resulting in less money for your retirement and potentially reducing your quality of life in retirement. However, retirement planning should not jeopardise your immediate well-being; it is not worth enduring poverty conditions or risking your home just to honour a commitment to your future self. You will need to carefully weigh these considerations.

Even if it seems like a small amount now, withdrawing from your KiwiSaver fund means missing significant growth over your working years. Money invested earns extra returns through compounding interest (Compounding Interest Explained).

Remember, before withdrawing from your KiwiSaver for financial hardship, be sure to explore all alternatives, such as seeking budgeting advice or financial counselling, and looking into government assistance programmes. This careful consideration can help you manage expenses and prioritise debts while protecting your long-term financial security.

Conclusion

In summary, while a KiwiSaver financial hardship withdrawal can provide crucial support during difficult times, it should be viewed as a last resort. It’s vital to thoroughly explore all available options before making this significant decision. Consider seeking budgeting advice or financial counselling, and investigate government assistance programmes that could offer temporary relief without depleting your retirement savings.

Remember, withdrawing from your KiwiSaver may have long-term consequences, potentially reducing your retirement balance and future returns. For instance, taking out $10,000 today could result in a loss of around $50,000 by the time you retire.

*This is based on the assumption of being invested in an aggressive fund earning 5.5% per annum for 30 years.

Ultimately, the key message is to prioritise your long-term financial security. If you find yourself facing financial difficulties, we encourage you to look into your options and to contact us for support and explore your options further. Taking proactive steps now can help safeguard your future while addressing your immediate needs.