Deborah applied to withdraw funds from her KiwiSaver account on the grounds of significant financial hardship (SFH). Deborah wanted to use the funds to pay her everyday living expenses, and to pay for some study.
Deborah had a partner, Allan. As part of the application process, Deborah provided information about funds held in Allan’s bank accounts ($60,000). Deborah explained that those funds were set aside to pay debts Allan owed to third parties (but which had not yet been invoiced). Allan had incurred the debts prior to his relationship with Deborah. Although Deborah and Allan asked several times, the third parties would not send copies of the debt invoices.
The KiwiSaver provider’s trustee declined Deborah’s application to withdraw funds. The trustee said it needed to receive better evidence that the funds in Allan’s bank account were already committed to pay the debts.
Deborah then complained to FSCL.
Deborah felt it was unfair for the trustee to consider her financial position alongside that of her partner, because they managed their finances separately, and the debts were Allan’s. In addition, Deborah said that it was outside her and Allan’s control that the invoices had not been provided.
The trustee said that because Allan was Deborah’s partner, their financial position was considered jointly, irrespective of how they managed their finances. The trustee referred to the Workplace Savings Group’s SFH Processing Guidelines. The Guidelines say that all applications require members to provide evidence relating to their total household income and expenditure for both the member, and their partner.
What do trustees base their withdrawal decisions on?
Clause 10(3)(a) of the KiwiSaver Scheme Rules (set out in Schedule 1 of the KiwiSaver Act 2006), says that a trustee must be reasonably satisfied that alternative sources of funding have been explored and exhausted before accepting an application to withdraw KiwiSaver funds. Whenever a KiwiSaver member wants to withdraw funds earlier than retirement, the trustee must be satisfied that withdrawing the funds is a last resort. The Rules also say that trustees can ask for evidence to support applications.
We told Deborah that, although we could accept that the $60,000 was set aside to pay the debts, she still had to provide sufficient evidence of the debts. We also told Deborah that if the trustee simply relied on what the KiwiSaver member said on their applications, without sufficient evidence, trustees could be releasing funds in circumstances that do not meet the high withdrawal thresholds.
We also outlined that trustees must be consistent in how they assess early withdrawal applications. This meant it was reasonable for the trustee to require Deborah to provide better evidence of the debts. We told Deborah that if she could obtain better evidence (for example, invoices), she could resubmit her application.
Deborah did not accept our decision, finding it difficult to accept that she could not access her KiwiSaver funds. Deborah abandoned her complaint.
Insights for consumers
It is important for KiwiSaver members to remember that although their KiwiSaver funds belong to them, this does not mean that they can simply access the funds when they consider they need them.
The purpose of KiwiSaver funds is to provide for members when they retire. This means there are high thresholds to meet when applying to withdraw funds early and it is quite reasonable for trustees to require sufficient evidence of hardship, before releasing funds.