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With approved KiwiSaver financial hardship applications at record highs in 2018 per published data, KiwiSaver providers are reporting being buried in avalanches of paperwork, bullied by emotional clients and stressed out by the emotional toll as they try to help New Zealand’s most vulnerable people. MoneyHub published a KiwiSaver hardship application guide today to give light on the process in response to a lack of information previously available.
MoneyHub’s Senior Researcher Christopher Walsh says:
“KiwiSaver providers we spoke to are feeling the brunt of a growing number of desperate New Zealanders hoping to solve cash flow issues by tapping into their KiwiSaver money. The applications are causing a lot of stress and frustration for all parties, and no provider has escaped the wrath”.
“The government is only publishing monthly data for approved hardship withdrawals, but many applications are rejected, so we don’t know how many people are applying in total. We understand a number of providers receive 3-10 applications a day, but one is understood to have received 30 applications in one day recently. Given the applicants’ urgent need of this money, the resources to assess and process the applications are not always available".
"While we don't know the number of applications received in total, we do know that the application numbers are unprecedented. To cope with the demand, we are aware that a couple of KiwiSaver providers have recently hired specialist teams to assess hardship applications full-time, but this comes at a great cost which, potentially, could raise fund fees".
"While the governance framework for assessing applications is thorough, we have no idea if it is being applied consistently between providers’ Supervisors who are currently tasked with making a decision on each application”.
“Ultimately, MoneyHub believes the task needs to be centralised with a government department. KiwiSaver providers lack access to government information which could help process hardship applications more efficiently and fairly, and MoneyHub believes the IRD is best suited to handle such applications, irrespective of its upcoming internal restructuring plans".
"If someone is experiencing significant financial hardship, waiting up to six weeks to redeem their money is likely to be too long, and KiwiSaver providers are feeling the stress first hand. In some cases, we heard providers receiving threats of self-harm, violence and suicide from members in regards to their financial hardship application".
"It's an open secret that middle New Zealand is cash-strapped, and MoneyHub expects a surge of KiwiSaver hardship applications in 2019. KiwiSaver providers are responsible for growing the investments of New Zealanders, and we believe they shouldn't be side-tracked by having to allocate resources for ultra-sensitive, emotionally-draining and time-consuming redemption assessments".
"We believe KiwiSaver members making a hardship application would prefer to deal with a government organisation given the sensitivity of their financial situation and immediate needs. New Zealand is one of the few countries in the world where it's possible to withdraw state pension funds early, and we don't believe it is the responsibility of every provider to invest 4 to 10 hours to assess one application".
"We've published a guide to KiwiSaver hardship applications to help any New Zealand considering a hardship application by explaining what they need to know, at a level of detail previously unavailable. We expect it to become the go-to resource for anyone making a financial hardship application".
"If the government is unwilling to change who is responsible for assessing hardship applications, MoneyHub believes that a budget advisor should vet applicants, and applicants should be receiving budget services for a minimum of four weeks before applying. Otherwise, there is a real risk that any KiwiSaver funds returned will only provide temporary relief to the issue causing hardship”.
“We feel it is also important that applicants must have stopped their contributions before applying - even 3% of income per week is a lot of money for someone in hardship, and this could help solve the immediate issues".
More: KiwiSaver Hardship Application Guide
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