Kiwisaver is a voluntary, work-based retirement scheme in New Zealand. Kiwisaver funds can also be used by first home buyers towards the deposit or purchase price of a property. Purchasers are often unaware of the process involved in making a Kiwisaver application and this can result in delays or not being able to access your fund at all. To ensure your application goes as smoothly as possible, it’s important to consider the following:
Most Kiwisaver providers will offer a pre-approval letter that sets out how much can be used from your Kiwisaver account towards the purchase. Though this won’t speed up the application process, this pre-approval letter will assist with certainty in your finance plans and prevent mistakes that can arise from assumptions about how much you are entitled to.
Kiwisaver applications take time. Often purchasers think that the Kiwisaver process can be completed quickly and easily at any time, however this is not the case. Most Kiwisaver applications take between 10-15 working days to process and require a large amount of information. As part of the Kiwisaver application you will need to:
- Fill in the application form provided by your Kiwisaver provider (this can be done with or without assistance from a lawyer);
- Sign a statutory declaration which needs to be witnessed by a solicitor (usually your property lawyer); and
- Attach certified copies of supporting identification documents to the application
Your solicitor will also have to provide a letter confirming the due dates of the deposit and settlement of the agreement, along with an undertaking as to whether the agreement is conditional or unconditional.
If the application has been filled out incorrectly or does not include the correct supporting documents this can cause extra delays in processing. Kiwisaver providers take no responsibility for delays in processing applications so it is especially important to have the application done in time.
The Kiwisaver application timeframe also impacts the dates for a sale and purchase agreement. If you are wanting to use your Kiwisaver its important to ensure you have a finance condition period of at least 10-15 working days from the date of the agreement to give you time to draft and finalise the application. You will also need to allow at least 10 working days from the date the agreement goes unconditional until the settlement date so that there is enough time for the application to be processed by your provider.
Any balance withdrawn cannot be used again
After approval is granted for your Kiwisaver application the money will be deposited directly to your solicitor’s trust account. If your funds have not arrived from your Kiwisaver provider in time for settlement they cannot be used towards the purchase. Crucially, there is also no option to arrange a temporary loan from another avenue and repay this when the Kiwisaver funds comes in. If the Kiwisaver funds arrive after settlement they will need to be returned to your Kiwisaver provider and will be locked up until your retirement or in limited circumstances until you can successfully apply for an exemption.
Using Kiwisaver for the deposit
It is possible to use your Kiwisaver funds for the deposit of a purchase, as long as you are not purchasing through an auction. However, this comes with restrictions and will require alterations to most sale and purchase agreements. To use Kiwisaver for the deposit you will need to ensure the agreement provides the deposit is payable on the agreement becoming unconditional not on the signing of the agreement and that the deposit is paid to the vendor’s solicitors’ trust account. The vendor’s solicitor will need to provide an undertaking that they will hold the funds in their trust account until the settlement date or will repay the funds if settlement does not occur (usually the real estate agent holds the deposit funds for 10 working days before releasing to the vendor’s solicitor). This will be especially important in purchases with long settlement periods as the vendor will likely be expecting to receive the deposit earlier than settlement.
Kiwisaver is an easy and affordable way to invest for your retirement years and first home purchase. To ensure you get the full benefit of your Kiwisaver investment and to avoid nasty surprises we suggest getting your Kiwisaver application started as soon as possible when looking to purchase.
This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.