KiwiSaver Hardship Withdrawals

Navigating through a period of financial difficulty can be challenging but KiwiSaver members may have an option to ease their burden through a significant financial hardship withdrawal. KiwiSaver is primarily intended as a retirement savings scheme with your savings usually locked in until you turn 65. However, strict criteria exist for accessing these funds earlier in certain circumstances. Here we guide you through what significant financial hardship withdrawals mean, who is eligible and how to apply.

Common Situations Where a Hardship Withdrawal May Apply

KiwiSaver allows members facing serious financial distress to apply for a withdrawal if they’re unable to meet their minimum living expenses. These include essential costs such as food, accommodation, power, water, gas and necessary transport. You may also apply if you’re struggling to pay your mortgage on your family home and are at risk of enforcement by your lender. In more specific cases, your application may be considered if you or a dependent require your home to be modified due to disability, if you need to pay for necessary medical treatment or palliative care or to cover the costs of a dependent’s funeral.

Expenses That Aren’t Covered

While the intention of this withdrawal is to provide relief in serious situations not all expenses are eligible. Withdrawals cannot be made for credit card purchases, paying off court fines, meeting overdue tax obligations or mortgage payments on investment properties. Additionally, holidays, travel or non-essential purchases are not considered valid for a hardship withdrawal. The aim is to support only genuine minimum living expenses during times of unavoidable hardship.

How Much Can You Withdraw?

The amount available for withdrawal is carefully assessed and is not guaranteed. You may only apply to withdraw your own contributions and any funds your employer has put in. Government contributions (such as the annual member tax credit) and the initial Kickstart payment cannot be included. The Supervisor, (who operates independently from any KiwiSaver provider and is responsible for upholding the scheme’s rules and fairness) reviews your financial information to determine the amount.

They do this by calculating your budget deficit. This is essentially the gap between your weekly income and what is considered “minimum living expenses” by typical New Zealand community standards. It’s important to note these minimum expenses may be lower than your actual current spending. The maximum amount you can be paid is typically 13 times your weekly deficit or the sum of any overdue essential bills you provide as evidence, whichever is greater. Any funds approved must be used specifically for those arrears or essential costs.

Who Makes the Final Decision?

An independent supervisor oversees these applications and is not affiliated with any provider. Their role includes making sure both the rules and spirit of KiwiSaver legislation are upheld, balancing the need for retirement savings with genuine cases of hardship. Application assessments are thorough, considering your total household situation including all sources of income, assets and contributing members. You’ll be expected to show that you’ve tried every reasonable avenue to improve your situation such as seeking assistance from your bank, Work and Income New Zealand or by accessing any personal savings or investments before applying.

Preparing and Submitting Your Application

To begin your application you’ll need to complete a Significant Financial Hardship Withdrawal form. Supporting documents are key. These may include payslips, evidence of bills and a breakdown of your partner’s (or other household members’) income if they help with shared expenses. If you’ve recently separated from your partner you may need to provide proof, such as a court order or an explanatory letter, to confirm your household situation. A statutory declaration, completed and signed in front of an authorised witness like a Justice of the Peace, is also required to confirm your application’s accuracy.

The application can be posted, emailed or handed in at your KiwiSaver provider’s branch, depending on their requirements. Making sure you provide all required information helps avoid any delays in processing. If something is missing you may be contacted for clarification, which can extend the timeframe.

How Long Does the Process Take?

Once you submit your application it is first reviewed by your KiwiSaver provider’s team. They ensure everything is complete before sending it to the Supervisor for the final decision. Usually, the review takes up to 10 business days, with a further period of up to 20 business days for payment once approval is granted. Complex cases, requests for additional information or public holidays can stretch these timeframes. If your withdrawal is to be sent overseas it may take extra time to clear and appear in your account.

What If My Application is Declined?

If your application is declined or your situation changes (such as losing your job or acquiring unexpected expenses) you can reapply. Providing new or updated information that affects your financial situation may prompt reassessment.

The Importance of Careful Consideration

Remember, KiwiSaver is intended as a long-term savings solution for your retirement years. Withdrawing funds early reduces the amount you will have later. Before applying for a hardship withdrawal it’s important to speak to your bank, WINZ or access free budgeting advice from organisations like the Citizens Advice Bureau. Your provider can also give you an estimate of what may be available for withdrawal.

Using hardship withdrawals judiciously can provide essential relief when your options are exhausted. If you find yourself in genuine need understanding the process and providing thorough documentation will help ensure your application is processed as smoothly as possible. KiwiSaver’s hardship mechanism exists to support you through difficult patches while protecting your ability to save for the future.