Insights for consumers
If you have concerns about how your KiwiSaver account was opened, or whether the account is valid, talk to your KiwiSaver provider and the Inland Revenue Department (IRD) as early as possible.
Your KiwiSaver provider is the organisation that manages and invests your KiwiSaver funds. They receive withdrawal applications, but do not make decisions on them.
If your account is found to be invalid, it can be retrospectively validated under the KiwiSaver Act. If you do not want your account validated, it will be closed. The Crown will be reimbursed for any government contributions paid into your account, and any employer contributions will be reimbursed to the employer before the account is closed. The remaining contributions you made will be paid out to you.
If you made KiwiSaver withdrawals that included employer contributions, you will need to pay back the employer contributions when closing the invalid account. This could leave you with a smaller KiwiSaver balance than you expected.
What happens if a KiwiSaver account is opened incorrectly
Isla* had made four KiwiSaver financial hardship withdrawals between 2020 and 2024, totalling just over $10,000.
Isla became concerned that her KiwiSaver account had been opened incorrectly. She was only 17 years old when she first started working, and her parents had not given consent to open the account. It was opened automatically through her employment. The KiwiSaver provider (provider), which managed Isla’s KiwiSaver, could not confirm whether parental consent had been obtained and encouraged Isla to contact the Inland Revenue Department (IRD).
Isla’s KiwiSaver account was found to be invalid
IRD investigated and found the account was invalid because it was opened when Isla was under 18 years old without parental consent. Isla could validate the account retrospectively, but she decided she wanted the remaining balance paid to her instead. IRD applied the rules for invalid accounts, which required the reimbursement of employer and government contributions to current and previous employers and the Crown, respectively.
Why was Isla left with nothing?
After those repayments, there was no balance left in Isla’s account. The IRD told Isla that the earlier hardship withdrawals had included employer contributions, meaning she had withdrawn more than her personal contributions by approximately $2,000.
The provider said they had included some employer contributions in the withdrawals, following the KiwiSaver Act and industry practice.
Isla thought the provider should have warned her
Isla said she was in hardship and complained to FSCL. She said the provider had a responsibility to explain the potential impact of hardship withdrawals.
The provider said there was no legal requirement to give warnings about including employer contributions in hardship withdrawals, or about the remote possibility of repayment if an account is later invalidated.
Why FSCL decided the provider did not have to warn Isla
We reviewed the law, the relevant KiwiSaver rules, and industry practice.
The KiwiSaver Act has a validation process for accounts found to be invalid, so that members can keep the funds for their retirement. We considered it rare for an account to be found invalid and for the member not to want it validated.
We noted that KiwiSaver providers must tell members certain things when early KiwiSaver withdrawals are made, but they are not required to warn about rare or remote scenarios. In our view, the possibility of reimbursing employer contributions if an account was later found to be invalid was too rare to require a warning.
What was the outcome of the case?
We decided the provider did not have a legal or fairness-based obligation to warn Isla about the potential impact of hardship withdrawals on an invalid account.
We explained to Isla that it would not be fair to require the provider to pay Isla any compensation. We did not uphold Isla’s complaint, and it was closed.
