COVID-19 – what is the impact for Kiwisaver funds?

Our very own Mortgage Lady, Heather, was recently interviewed on Radio New Zealand about the impact that COVID-19 is having on Kiwisaver schemes, given many first home buyers relying on their Kiwisaver to assist with the deposit for their first home.
 
Once someone has been in the Kiwisaver scheme for 3 years they become eligible to access those funds to help with the purchase of their first home. 

Currently first home buyers are dreading the affect the volatile markets may be having on their Kiwisaver schemes. 
 
Heather says that nearly 90% of Mortgage Ladies & Co clients who are first home buyers are relying on Kiwisaver funds for their deposits and she has started to see clients finding themselves short of the funds required to enable them to go unconditional on their home purchase, and are struggling to find the shortfall.
 
One of her clients found they were as much as $9000 short of the expected funds required to go unconditional on their purchase:
     “A lot of our buyers don’t have that kind of money lying around or other pools of resources they can call on. Working on a tight budget, and if relying on Kiwisaver for your deposit, it is absolutely imperative you understand exactly how much you will have at the time of withdrawal before going unconditional.”
 
The effect of this could mean that first home buyers may have to drop the price range they are looking in.

With the market so volatile it is recommended that buyers factor in the 10 day timeframe between requesting the funds and when they are processed, where every day could mean a change in value of their Kiwisaver. The extent of the impact is likely to be greater in a more risky growth fund than in a safer conservative fund.
 
Heather went on to say that she feels there is a lack of understanding of how Kiwisaver works, with many still thinking of the Kiwisaver as a savings account, and therefore recommends now is a great time to familiarise themselves with the scheme, and work out what sort of low to high risk fund suits them best.

Here is some Kiwisaver info:

Eligibility for KiwiSaver Withdrawal

·       a member of a complying fund

·       have been a member of KiwiSaver for at least three years contributing the minimum required

·       intend to live in the property. (It cannot be used to buy an investment property.)

What can you get?

·       You can withdraw all contributions including member’s tax credits can be withdrawn (with the exception of the Government $1,000 kick-start).

·       Effective 1 April 2015 and onwards your KiwiSaver withdrawal may include:

o   your members contributions

o   any employer contributions (voluntary and compulsory)

o   any returns on investment(s) received

o   any member tax credits.

NOTE: From 1 June 2015, legislative changes will allow a first home withdrawal to be used to make deposit payments in certain circumstances.

How do you Apply?

·       The withdrawal is administered by your KiwiSaver scheme provider or relevant complying fund managers and if approved the payments of the funds will be paid to your solicitor on or before settlement day.

For more information about financial help for first home buyers check out:

https://www.govt.nz/browse/housing-and-property/buying-or-selling-a-home/buying-your-first-home/