A.         Withdrawing money from KiwiSaver for a First Home is relatively easy, and you should be able to withdraw all your own (and any employer) contributions that you have made. The main criteria are that you have been in KiwiSaver for at least 3 years, and that this is your first home whether in New Zealand or overseas. 

 

Saving into your KiwiSaver account rather than into a bank account would generally be a good option, as you will be able to watch your savings grow and when you start house hunting you will have a fair idea of how much you will be able to withdraw. 

 

One word of warning - you do need to assess the risk profile of your KiwiSaver, as the more aggressive funds (even balanced funds) may drop in value by 10% or more if markets fall, and this would mean less money for your dream home. A general rule of thumb is to stay out of shares if you plan to spend the money within three years, particularly if you have a large amount saved. If your balance is small you could stay in a balanced fund for a year, and then move to a conservative fund in a year’s time. You will realise that there is a trade off – moving to a lower risk fund will reduce the risk of a big fall in value, but it will also mean lower returns. 

 

Work out the dollar value of say a 10% fall based on your fund value, and see if you are comfortable with that. A conservative fund could also experience a year of negative returns, but they should be no more than single digit if the fund manager sticks to their mandate. Most KiwiSaver managers also offer a cash fund, and that is a good option as you get closer to house hunting time. Talk to your fund manager about switching from one fund to another. They will have a form for you to fill out and sign, and it will get done.

 

Changes are afoot for people looking to buy their First Home with KiwiSaver, and if the legislation goes through it will provide more help to KiwiSavers buying their First Home. It is proposed that from 1 April 2015 KiwiSavers will be able to apply to withdraw not only their own and their employer contributions, but also all Member Tax Credits that they have received. Only the ‘kickstart’ will be left. 

 

You may also qualify for the KiwiSaver First Home Deposit Subsidy – to be re-named the KiwiSaver HomeStart Grant. It is proposed that this will double from a maximum of $5,000 currently to $10,000. This money is available to KiwiSavers who meet certain criteria for contributions over three to five years, earn less than $80,000 per annum (or $120,000 for a couple) and who are buying a house within the price cap for their region. Full details are available on the Housing Corporation website, and I recommend that anyone planning to buy a First Home at any time in the future should make themselves familiar with the rules as they are very specific, and not contributing enough or earning too much (or even buying a section before you build) can disqualify you from getting this very generous subsidy.

 

In announcing the changes last year Minister for Building and Housing Minister Nick Smith said, “Home ownership has been in decline since the mid-1980s and census data shows the greatest decline amongst 20-to 35-year-olds. This package is targeted to help this group and enable them to get on to the housing ladder earlier. Two-thirds of the group expected to benefit from KiwiSaver HomeStart are in this age bracket.”

 

These changes are proposed but the legislation has not yet been passed.   Watch for updates on the Housing Corporation website.

 

 

HB Today 13 January 2015