Consumer guide – KiwiSaver financial hardship

On this page:

• What is the application process to withdraw KiwiSaver funds?
• What is the threshold for a significant hardship withdrawal?
• How much can the member withdraw?
• What is FSCL’S role?
• Case notes

What is the application process to withdraw KiwiSaver funds?

The member applies for a significant financial hardship withdrawal through their KiwiSaver provider. The provider gives the withdrawal application to the supervisor of the KiwiSaver scheme. The supervisor is responsible for deciding whether the member can make an early withdrawal.

We encourage members to contact their KiwiSaver provider, before the member submits a withdrawal application, to discuss their financial circumstances and the withdrawal process, including the information the member will need to give the provider to support their withdrawal application.

The information needed depends on the reasons for why the member is in hardship. The supervisor may also need information from the member’s spouse or partner (or other people in the member’s household that contribute financially to the day-to-day running of the home).

What is the threshold for a significant financial hardship
withdrawal?

The threshold for a significant financial hardship withdrawal is very high. A member can only make a withdrawal if the supervisor is reasonably satisfied:

• the member is suffering, or is likely to suffer from, significant financial hardship
• reasonable alternative sources of funding have been explored and have been exhausted.

Significant financial hardship means significant financial difficulties that arise – for example, because:

• the member cannot meet their minimum living expenses
• the member cannot meet their loan repayments on their family home and
• the lender is seeking to take enforcement action (a mortgagee sale)
• of medical treatment costs for the member or a dependent
• of funeral costs for a dependent.

The supervisor cannot approve the withdrawal if it is not reasonably satisfied, based on the evidence before it, that the member meets the withdrawal criteria.

A withdrawal is essentially a last resort where the member has no other way to meet their minimum living expenses or other costs which are causing them financial difficulties.

How much can the member withdraw?

The supervisor can direct that the amount withdrawn is limited to the amount that the supervisor believes is required to alleviate the member’s hardship. This means that sometimes a supervisor will approve a withdrawal but it is less than
the amount the member wants to withdraw.

When considering a withdrawal application where the member cannot meet their minimum living expenses, the supervisor usually considers the amount required to assist with the member’s budget shortfall for the next 13 weeks.

We sometimes receive complaints where the member wants an early withdrawal so they can repay debt early. The supervisor may be able to approve a withdrawal so the member can meet their minimum debt repayments and pay arrears, but the supervisor usually cannot approve a withdrawal so the member can repay their debt early.

The member cannot withdraw government contributions from their KiwiSaver account.

What is FSCL’s role?

FSCL can investigate complaints about the supervisor’s decision to decline (or partially decline) a withdrawal application.

FSCL cannot require the supervisor to approve the withdrawal application, but we can encourage the supervisor to reconsider the application if we conclude the supervisor did not make a reasonable decision or that it made a mistake that affected the outcome of the application.

If we conclude the supervisor’s decision was reasonable, we’re unlikely to uphold the complaint and will suggest to the member that they should discontinue the complaint.