11 Feb 2009

More pull out of Kiwisaver payments, say providers

2:47 pm on 11 February 2009

Fund managers providing the savings scheme, Kiwisaver, say more and more people are pulling out of payments on grounds of economic hardship.

Gareth Morgan, who provides one of New Zealand's 30 Kiwisaver funds, has noticed an increase in savers applying for hardship contribution holidays, because they have lost their jobs.

Mr Morgan says while his Kiwisaver fund will stay afloat, others who do not have a large number of clients and are not yet breaking even will struggle.

The chief investment officer at Westpac's investment business BT Funds Management, Paul Richardson, has also noticed an increase in the number of people applying for hardship holidays.

But he says the effect of the Government's changes that effectively halved the potential rate of total Kiwisaver contributions will have a greater effect on providers than the numbers taking a break from contributions.

Philip Macalister, the publisher of the financial advisory news site Good Returns, predicts half the Kiwisaver providers will drop out.

He said funds that remain are likely to take longer than the expected five years to break even.

People enrolled in Kiwisaver can take a contribution holiday of up to five years by applying to Inland Revenue after a year in the scheme.

Those in the scheme for less than a year can apply directly to their fund manager for a hardship holiday.