The section of land
George’s employer announced in 2012 that employees would be able to access superannuation funds under the employer’s superannuation scheme for a first home purchase, similar to a KiwiSaver scheme. George read through a document provided by his employer containing frequently asked questions about the criteria to withdraw funds from the scheme.
In late 2012 George and his wife purchased a section of land funded by their savings and a loan from their bank. George and his wife intended to build a home on the section.
In early 2013, George applied to withdraw funds from his superannuation fund to help pay for the home build. George was disappointed to be told by the superannuation fund managers that he could not withdraw funds to build a home on his land, because he had previously owned property – that is, the section of land.
George complained to FSCL that the frequently asked questions document was not clear that funds could not be withdrawn to finance the building of a house on a piece of land.
The trust deed
We reviewed the trust deed. The deed stated that clause 8(3)(b) of Schedule 1 of the KiwiSaver Act 2006 (“the Act”) must be adhered to for a first home withdrawal application to be successful.
Unfortunately for George and his wife, the Act makes it clear that if the applicant has previously held an ‘estate in land’ a withdrawal for a first home purchase is not permitted. We had to conclude that the trustees had correctly declined George’s withdrawal application, because he already owned an estate in land – the section.
George’s reliance on the documents provided by his employer
There was correspondence between the trustees and George’s employer which indicated that if the intention was to use superannuation funds to finance the building of a home on a piece of land, any withdrawal application needed to be for both the purchase of the land and the house build. However, this specific information was not outlined in the information given to George and his fellow employees.
We strongly recommended that the trustees liaise with George’s employer to ensure the documents given to employees outlined specifically the criteria surrounding applications to withdraw funds to finance the building of a home to avoid confusion in the future.
Lessons to be learned
It will always be the trust deed which sets out the criteria upon which trustees will consider applications to withdraw funds from a superannuation scheme. You should always ask to review the trust deed, especially if you will be relying on the ability to withdraw funds for a major project – such as building your home.
Fund managers and employers should be careful to ensure that documents they provide to members of superannuation schemes are clear, particularly when exclusions to withdrawal may apply, and encourage readers to seek advice if there is any lack of clarity.