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Private school fees contribute to financial hardship

The story

Rachael and Jason’s primary school age children had been bullied at two different schools.  Rachael and Jason felt their children were no longer safe within the public school system and decided they had no option but to move their children to a private school.


Rachael and Jason were unable to afford the private school fees, placing pressure on an already difficult financial situation.  Rachael and Jason decided to apply to Jason’s KiwiSaver provider to withdraw money on the grounds of significant financial hardship.



The KiwiSaver scheme’s trustee declined Jason’s application.  The trustee said the Workplace Savings Significant Financial Hardship Processing Guidelines (the Guidelines) expressly excludes the release of KiwiSaver funds for private school fees.  The trustee was not satisfied Rachael and Jason had exhausted all reasonable alternative sources of funding as required by the KiwiSaver Scheme Rules in Schedule 1 of the KiwiSaver Act 2006 (the Act).  The Trustee noted Rachael and Jason were giving $150 a week to their church.


Rachael and Jason did not accept the trustee’s decision saying they had no option but to move their children to a school where they would be safe.  Rachael and Jason also did not appreciate the trustee’s comments about their giving to their church.


FSCL’s review

We noted that KiwiSaver was introduced to help people save for their retirement.  The government has deliberately made it very difficult for investors to access their KiwiSaver Funds before retirement age.  However the Act does allow the trustee to release money if the trustee is satisfied the investor is suffering from significant financial hardship and all reasonable alternative sources of funding have been explored and exhausted.


Significant Financial Hardship Processing Guidelines are a starting point

Although the trustee has a discretion to release funds the Guidelines were introduced to provide consistency between the trustees of different KiwiSaver schemes when assessing financial hardship applications.  The Guidelines are the starting point from which a trustee may depart if there is good reason to do so.


The Guidelines’ starting point is to exclude private school fees from a person’s minimum living expenses.  To depart from the Guidelines and include private school fees as a minimum living expense the trustee would have to be satisfied Rachael and Jason had no option but to enrol their children in a private school.


We observed Rachael and Jason had not given the trustee any independent proof that their children were not safe in the public school system.  Rachael and Jason had told us they had complained to the Ministry of Education.  We suggested Rachael and Jason provide a copy of the Ministry of Education complaint to the trustee to help it understand why the decision to send their children to a private school was not a choice, but a necessity.


Reasonable alternative sources of funding

We also noted that the Act requires the trustee to be satisfied alternative sources of funding have been explored.  The Guidelines allow trustees to consider tithing and donations as part of minimum living expenses.  However we considered it would not be unreasonable, when looking at Rachael and Jason’s financial commitments as a whole, for the trustee to ask whether giving such a large proportion of their income (10%) was reasonable.



Rachael and Jason were disappointed with our decision, but could see they were unlikely to succeed in their application to withdraw KiwiSaver funds to pay for the private school fees.  Rachael and Jason agreed to discontinue their complaint.