I would just like to make the case for two additional types of situations in which people should be allowed to withdraw some or all of their KiwiSaver funds. Before I do that, we should just review the current reasons allowed for withdrawal and the rationale for them:
- Buying a first home
- Hardship
- Serious Illness
- Permanent Migration
You can check out the details at the Inland Revenue's KiwiSaver site, at this link. However, the reasons are basically these:
- Buying a home is highly correlated with well-being in retirement. So we encourage people to achieve that lfie goal.
- Hardship is obvious - no point retiring Okay if you're so broke that you, or your family, are in dire straits right now.
- With serious illness/disability it's again obvious: we should let you enjoy your money while you can.
- Permanent migration is simply about natural justice - is the money yours or isn't it?
I would like to suggest two more circumstances in which funds could be withdrawn which are, I believe, entirely consistent with these principles.
- To obtain a degree
- If your life expectancy means you are likely to die before the age of eligibility for New Zealand superannuation
Higher education is so strongly correlated with increased income that if you haven't already got a degree, and you are still young enough to benefit from many years of increased income should you complete one, then it's simply enlightened self-interest to allow a person access to some of their KiwiSaver funds. Once qualified they may well contribute far more. Allowing some access right now will encourage them and reduce the student loan burden.
Life expectancy is a cousin of the existing terminal illness facility. A good number of people while not current ill or disabled will have a much lower life expectancy. For them we are doing them a disservice by requiring them to save money they will never get to enjoy.