MANY NEW ZEALANDERS suffering severe financial hardship turn to their KiwiSaver accounts to withdraw money to pay for bills, mortgage and other basic costs.

Nearly two thirds of New Zealanders have a KiwiSaver account - that's about 3.3 million people.

KiwiSaver has two purposes, one is as a retirement fund, the other is as part of a deposit on a first home. But it can also be withdrawn if the saver is suffering hardship, for example they are behind on mortgage payments and facing the loss of their home. There are strict criteria for withdrawals, however.

How it works

The KiwiSaver provider accepts an applicant’s paperwork and processes the transaction, but it's the scheme's supervisor - Public Trust, Guardian Trust or Trustees Executors – that makes the final decision.

If you withdraw on the basis of not being able to cover minimum living costs, the amount you can take out is usually equal to about 13 weeks of expenses.

To withdraw savings you will need to provide evidence you are suffering significant financial hardship.

According to the IRD there are several scenarios where you:

• cannot meet minimum living expenses
• cannot pay your mortgage, and your mortgage provider is seeking to enforce the mortgage
• need to modify your home to meet your special needs or those of a dependent family member
• need to pay for medical treatment for yourself or a dependent family member
• have a serious illness
• need to pay funeral costs of a dependent family member.

A withdrawal cannot be used to pay off debts.

Any KiwiSaver member (having been in the scheme for at least one year) can also suspend contributions from wages. This is made through the IRD and you will find more information on this page.

You may also be able to use your KiwiSaver to pay off your debts if you become bankrupt.

Alternatives

Withdrawing from KiwiSaver is a last resort as you are taking out funds that are earmarked for retirement.

Think of other options, such as discussing with your bank about extending the mortgage or ask Work and Income for assistance if you have become unemployed.

Also be aware of scam emails offering to help with hardship withdrawal. No provider would ever do this so it will certainly be a scam.

Financial mentors are available to help with applications and MoneyTalks advisors can point anyone in the direction of local mentors.