KiwiSaver hardship claims hit high

Hard-up Kiwis tapped into their retirement savings in record numbers during March and KiwiSaver trustees say application numbers are rising.

Inland Revenue figures show 1390 people made hardship claims against KiwiSaver during March — the latest data available — the highest monthly claims since the scheme launched in July 2007.

Those people took just under $7.2 million out of their savings pot, shy of the record amount withdrawn in one month in December 2016 when 1371 people took out $7.5m.

Hardship applications have been steadily rising with the growth in KiwiSaver membership.

In the year to June 2016, 10,666 people took $59.4m out of their retirement savings account because of hardship.

That was up from the 8248 people that took out $41.1m in the year to June 2015.

So far in the nine months to March 10,657 people have taken $54.6m out for hardship reasons.

Gerard Field, senior manager of client services at Public Trust, which handles hardship claims on behalf of a number of KiwiSaver schemes, said it had seen application numbers rise from 63 a week in 2015 to 121 a week this year. “It certainly is increasing.” Field said he couldn’t put his finger on any one cause for the rise but said membership of KiwiSaver had grown by around 100,000 people between 2015 and 2016.

At the same time balances were growing and the average KiwiSaver pot was now around $12k to $13k.

“I think people see that and see the credit card bill . . . Four to five years ago balances would have been half of that.”

Field said claims were often seasonal with more applications coming in around Christmas time or

Common reasons are a reduction in work hours, redundancy, illness and unforeseen expenses such as . . . house repairs. Mark Jephson, Guardian Trust

in January and February when the credit card bills hit home.

He said anecdotal evidence pointed to most claims being linked to an event in a person’s life such as a redundancy, the death of a partner or ill health.

Field said the claims were often heart-breaking to read.

“They have realised in the end this is their last port of call.”

Mark Jephson, general manager of corporate trusts at Guardian Trust, which also handles hardship claims on behalf of KiwiSaver providers, said his team had noticed a rise in claims in recent months and also pointed to rising balances.

“KiwiSaver member numbers are increasing year on year which . . . will likely result in increased significant financial hardship withdrawals.

“However, member balances are generally increasing and members are often able to easily view their balances online.

“This may result in members being more inclined to make a significant financial hardship application ... rather than incurring further personal debt.”

Jephson said as KiwiSaver balances continued to rise some members would not request all of their money or the value of the withdrawal approved would be limited to the amount needed to alleviate the significant financial hardship.

But he said sometimes people came back for a second application which could also be a driver of higher withdrawal numbers.

Jephson said the reasons why people made hardship applications varied, but typically related to macro and micro economic factors combined with an unforeseen change in circumstances for the member meaning they are no longer able meet their day-to-day living expenses, including repayment of personal debts.

“Common reasons are a reduction in work hours, redundancy, illness and unforeseen expenses such as car or house repairs.”