Mary’s Q&A column appears in the Business section of the Weekend Herald. Mary was a finalist for the "Best Columnist – General" award for this column in the 2014 Canon Media Awards.
NZ Herald 16 June 2018
Q&As: Who to appeal to on KiwiSaver financial hardship withdrawal
- Check insurance if doing Airbnb
- Upset reader wants me to apologise to fathers
- Pick your term when 'laddering' term deposits
- Ask the bank, and ye shall receive
- Tax on landlords 'would be unfair'
- One reason some don't contribute to KiwiSaver
Question: I am in the process of unsuccessfully trying to get some of my KiwiSaver out due to financial hardship. They have declined both my applications.
I believe my application will then go to their complaints team, and if they also decline I can take it to the Financial Markets Authority. If they decline, what can I do then?
Answer: Obviously these are tough times for you. But as you've found out, it's not easy to make a financial hardship withdrawal from KiwiSaver.
The decision is made by the supervisor of your KiwiSaver scheme, a separate company that basically watches over the provider.
If you're unhappy with the decision, complain first to the supervisor. If you're still dissatisfied you can take your complaint further - not to the Financial Markets Authority (FMA), but to the supervisor's disputes resolution scheme. Ask the supervisor who that is, or you can get it from your KiwiSaver scheme's Product Disclosure Statement, which should be on its website.
The disputes resolution scheme will listen to both sides of the story, and should make a fair decision. If that doesn't go your way, I'm afraid there's not much else you can do. You could perhaps sue, but that would be costly, and given the steps you've already taken unlikely to succeed.
Before you go take the next step, you might find it useful to read a document put together by Workplace Savings NZ, giving guidance to supervisors on financial hardship claims. That can be found at www.tinyurl.com/KSHardship.
On page 17 are examples of situations where the withdrawal is likely to be granted, or not. One example: If a car is required for work and there is no cheaper or public alternative, or money is needed to repair or replace a sole car for work, that would support an application. But if the applicant owns multiple cars, wishes to replace a working car, or has a large or expensive make or model, that "works against" an application.
I asked the FMA whether providers are required or obliged to give any support or make suggestions to people they decline, to help them recover financially. The answer is no.
However, I hope providers or supervisors at least refer people to the National Building Financial Capability Charitable Trust's website, www.nbfcct.com. It offers "free, confidential budgeting advice. With a financial mentor, you can create a plan to get out of debt, save money and start building a future for you and your family." Through the website, you can find a service near you.
I strongly suggest you give this a go, even if you end up being able to make the withdrawal.
KiwiSaver financial hardship withdrawals are on the increase. In the year ending March 2017, nearly 14,000 people made withdrawals, up 25 per cent on the year earlier. The average withdrawal was $5,786, says the FMA in its 2017 KiwiSaver Annual Report.
Question: I wish to point out an important area about Airbnb - insurance. Before you rent out any property, contact your insurance company. They will probably require you to take out commercial insurance because of the increased risks from your tenants. You could be endangering your domestic house insurance.
I came across this when my grandson and his partner stayed with me 24/7, and paid me rent for doing so. Both were working, and they did not want me to feel obliged to offer them free accommodation as relatives. I rang my insurance company who said, "It's marginal. Please find out how long they want to stay."
So to all those folk with tenants, please be aware of this important insurance area.
Answer: Thanks. Your comments are backed up by Tim Grafton, chief executive of the Insurance Council.
"If the usage of your home or domestic property is changing then you should definitely tell your insurer," he says. "Having tenants or renting out your home during holidays may increase the risk you're transferring to your insurer.
"It's common for insurers to ask what the primary purpose of a property is when quoting for insurance," he says. If your answers change later, you should let your insurer know as soon as possible. If you don't, and you make a claim, in some circumstances your insurer may refuse to pay all or part of the claim, or even cancel your policy.
Grafton adds that "contents insurance often does not cover theft by people allowed to stay on a property by its owners, such as house guests or house sitters. Should someone tenanting a house over the summer steal the possessions of the home's owner, an insurer may decline cover on the basis the tenants were allowed to stay.
"It's always better to talk to your insurer to understand exactly what you are and aren't covered for when circumstances change than to make assumptions," says Grafton.
I understand, too, that Airbnb may cover members for some losses.
Question: I am really upset by your answer in the first Q&A last week about the single mum.
You assume that the dad will become a deadbeat and stop paying. What if she becomes an alienator and wants to keep the child in blackmail to make sure she gets a truckload of money extracted from the ex-husband???
Sorry but I think your answer is biased and unfair. What if she discovers working won't net her as much child support, or she remarries and her new husband is on a huge wicket and she can then stop work and fleece the ex for more - as so often happens (in my case with my husband and his ex-wife).
I think you need to print an apology to all fathers out there.
Answer: Gosh. I didn't mean to upset you, or anyone else. If I did, I'm sorry.
For the benefit of other readers, last week's correspondent said:
"I will apply for child support midway through the year (once my paid parental leave runs out) from my ex-husband, but don't want to rely on this because I've heard circumstances can change long-term. But currently he is very willing to pay."
And at the end of her letter she added, "I would like to use some of my money for holidays with my son and in case his dad stops paying child support eventually."
In my reply, I mentioned at the end, "Your ex-husband won't be able to wriggle out of paying child support all that easily, although it does happen, so you're wise to allow for it."
I wasn't implying that lots of fathers stop paying. Many of them pay regular child support, and good on them.
Question: I'm writing about laddering term deposits, as you suggested last week. Three years ago - after selling the bach - I did exactly that, but with shorter time spans so money was always available.
I too divided the total by four, putting each quarter away for three, six, nine or twelve months. Then on expiry I re-invested each for a year.
It was the way to go as, when I needed to replace my car, I had the cash in a few weeks. People should consider the three months split I did.
Answer: It seems that you're regarding that money as a fund for unexpected expenses. In that case, I agree that setting up your term deposits so that one matures every three months - or possibly even every one or two months - is a good idea.
With last week's correspondent, I was thinking she might need the money less urgently. Getting access to some of it every six months seemed fine.
Don't forget there's a tradeoff. Under your plan, after a while you have everything invested for a year. Under my plan for her, she invests a quarter for six months, a quarter for 12 months, a quarter for 18 months and a quarter for two years, and then reinvests everything for two years. And these days you can usually get higher interest for two years than one year.
Given that the proceeds from selling a bach might be a fair whack of money, you might want to consider putting a portion of it into longer-term laddering.
Question: On laddering term deposits, I thought it would be helpful for your single mother of 29 to know that more often than not the banks will give another 0.5 per cent interest on top of their advertised rate simply by phoning them and asking.
Answer: I've heard of people getting a higher rate by asking. But that much higher? It would be interesting to hear from other readers who have talked a bank into raising their rate by half a percentage point or more. What did you say to get such a good result?
Question: Last week you said, "I've never wanted to drive landlords out of the market. I just want fair taxes."
A capital gains tax will always be unfair to someone. Putting such a tax on investment property will cause a distortion, as it treats one business/investment asset class differently from others. It's also too blunt an instrument, catching too much.
There's the case of "rentvesters" vs. owner-occupiers. Neighbour A and Neighbour B both live in Auckland. Neighbour A owns his house, but Neighbour B can't afford Auckland prices, so buys his first property elsewhere and continues to rent in Auckland where his job is.
Both A & B spend their annual holidays renovating their properties, so both properties are worth more. Both only have one property, both used their own labour. One pays tax, the other gets a tax-free gain. How is that fair?
There's the case of sweat equity. I am a small-time property investor, trying to grow. I recently put a huge amount of time and money renovating with my own two hands to improve a property, because I couldn't afford to pay tradies.
Under a CGT, I'd have to pay tax on that hard work as there is no deduction for the labour, and the consequent capital gain is seen as coming out of thin air. Conversely, if I'd paid tradies to renovate the rental, it would have been tax deductible. Is that fair?
Answer: I agree that your first "case" seems unfair. Perhaps everyone should have one tax-exempt property, regardless of whether they live in it.
But on your second case, if an employee were doing all that hard work they would be taxed on their wages. So it's not clear why you shouldn't be taxed on your gain.
More broadly, you're right that setting up a totally fair capital gains tax is probably impossible. But there's got to be a better system than the current one.
And by the way, I've never said a CGT should apply only to investment property. Shares and other investments should be included.
Okay, this is the Last of the Landlord Letters (sounds like a movie) for a while.
Question: You mentioned in your column that half a million KiwiSavers did not contribute anything into their accounts this past year. That figure would include many NZers like my two adult children who are based overseas (they're students). They aren't eligible for the annual tax credit so they don't put in any contributions currently.
Answer: Good point, but I doubt if overseas members make up a big proportion of the half million.
* Mary Holm is a freelance journalist, a director of the Financial Markets Authority and Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. Her website is www.maryholm.com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to email@example.com or Money Column, Private Bag 92198 Victoria St West, Auckland 1142. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.