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Serious illness test difficult to satisfy

The story

While she was working Sophie was electrocuted causing nerve damage.  Sophie’s employer decided she was medically unfit to perform her role, and terminated her employment.  Sophie applied to her KiwiSaver trustee to withdraw her savings, on the grounds of serious illness.


First medical opinion

Dr Smith assessed Sophie for ACC and agreed Sophie was unable to return to her pre-accident job because it required frequent driving and lifting.  However Dr Smith said that with further rehabilitation Sophie would be capable of a job with light physical demands.  Dr Smith suggested some jobs he considered would be suitable.

The trustee declined Sophie’s application on the grounds that Sophie was not permanently unable to work.


Second medical opinion

Sophie gave Dr Smith’s report to her GP, Dr White, and asked Dr White’s opinion.  Dr White wrote to the trustees saying it was improbable that Sophie would be able to work in the foreseeable future and that Sophie should be considered as unable to work indefinitely, if not permanently unable to work.


Trustee’s decision

The trustee reassessed Sophie’s claim and declined for a second time, saying it had weighed the evidence of the two doctors and decided to prefer Dr Smith’s opinion that, with further rehabilitation, Sophie would be able to return to work.



Sophie did not accept the trustee’s decision.  Sophie said the nerve damage following the electrocution had left her disabled and totally and permanently unable to work. 


FSCL’s review

We carefully reviewed Sophie’s case and were satisfied the trustee had correctly applied the KiwiSaver Act and had, in good faith, declined Sophie’s application.  The trustee was entitled to decide which doctor’s evidence to prefer.  We could not see any grounds to ask the trustee to reconsider.


KiwiSaver Act 2006

Clause 12 of Schedule 1 of the KiwiSaver Act allows a member to withdraw from the scheme if they suffer a serious illness.  Serious illness is defined as:

 “…an injury, illness or disability:

(a) that results in the member being totally and permanently unable to engage in work for which he or she is suited by reason of experience, education or training or any combination of those things; or

(b) that poses a serious and imminent risk of death.”

We explained the KiwiSaver Act’s ‘serious illness’ test is difficult to meet.  Medical opinion needed to satisfy the trustee that Sophie will never be able to work ever again in a role to which she is suited by experience, education or training.

Dr Smith was able to identify roles suitable for Sophie either now, or after further rehabilitation.  With this evidence the trustee could not say that Sophie was totally and permanently unable to return to suitable work.



Sophie did not accept our preliminary view, and asked us to reconsider. 

Sophie referred to the trustee’s duties at section 54 of the KiwiSaver Amendment Act 2011 and asked whether the trustee had acted in her best interests.  Sophie explained she intended using her KiwiSaver funds to pay for further rehabilitation.

Sophie also observed that despite three years passing since the accident, she had not improved.  Sophie asked how long she needed to wait before the trustee would accept she was permanently unable to return to work.



We were unable to uphold Sophie’s complaint.  We found the trustee’s decision to decline her application was reasonably made on the evidence available in accordance with the KiwiSaver Act.

Although the trustee is obliged to act in the scheme members’ best interests it could be argued retaining the funds in the scheme was in Sophie’s best interest – protecting her funds for her retirement.  It could also be argued that allowing easy access to funds could weaken the fund as a whole against the scheme members’ interests. 

The trustee said that if Sophie felt her circumstances had changed, and that later medical opinion  said that she was totally and permanently unable to work, she should reapply.