KiwiSaver: Why Financial Survival Now Shouldn't Take a Backseat to Retirement Savings Amid Covid-19

May 25, 2020

We know that these are extraordinary times, we haven’t seen anything like Covid-19 before and – touch wood – we never will again. And, as the saying goes – extraordinary times call for extraordinary measures.

Mortgage holidays, wage subsidies, rent relief – there are a number of measures that have been introduced with the express purpose of helping those most affected survive the current conditions.

But those measures will eventually come to an end, job losses are likely to continue to mount and many people, despite pulling the levers available to them, will find themselves struggling to make ends meet.

Which is why I find it extraordinary that the bar is still so high to access KiwiSaver on the grounds of financial hardship.

The IRD form essentially asks for proof that the bank is foreclosing on your home loan before they will release some of your money (because it is your money!).

That means you must first damage your credit rating – which will make borrowing harder and/or more expensive for you in future – to access your KiwiSaver as a financial lifeline.

There’s a petition currently appealing for the Government to consider relaxing the rules and while the argument the petitioner makes isn’t particularly well made, the basis of it is sound.  

While saving for your retirement is incredibly important (and is something many Kiwis fail to adequately do) – it’s also important to survive in the here and now.

Australia is well ahead of us in the retirement savings game– and I think they’ve also come up with a workable answer to the question of accessing those savings amid Covid-19.

Australians, (or Kiwis with Australian retirement savings)can access $10,000 of their super tax-free if they’ve been made redundant or have experienced a reduction in hours or business turnover of more than 20%. If those conditions persist, they’ll be able to withdraw another $10,000 between July and September.

Many families, even with spending cut to the quick and perhaps a benefit or subsidy in place, won’t have enough to survive. They may not have had a rainy-day fund, or it may simply have been exhausted. Their retirement savings could help them keep the wolf from the door for several months – precious breathing room while the future is so uncertain.

Plus, the depth of the taxpayer’s pocket is not infinite and debt levels are rising precipitously, so allowing people to part-fund their own rescue package makes sense to me.

I’m not suggesting people have unfettered access to their KiwiSaver funds, (and certainly no one is likely to be using it on an international holiday right now!) but Kiwis should be able to use it as a safety net without first prostrating themselves at the feet of their KiwiSaver provider or experiencing the stress involved in having a final notice from a creditor. Financial stress has so many downstream impacts – sleep, creativity, relationships and mental health all suffer when people are financially stressed, and we’ll start seeing the fallout of that soon enough.

Loosening the restrictions to KiwiSaver funds won’t be a silver bullet for all of that, but it would certainly be a start.

Hannah McQueen is an Authorised Financial Advisor, FellowChartered Accountant, Personal Finance Author and founder of enableMe – FinancialPersonal Trainers.

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