Is your Kiwisaver account available to creditors if you are…

the case is Official Assignee v Trustees Executors High Court, Wellington
Young J
CIV-2013-485-450
Media Neutral:
[2014] NZHC 345
the relevant part for you is
Declarations sought
[102]
I now turn to the declarations sought by the Assignee. Given my conclusions, I make the following declarations following the statement of claim prayer for relief:
“(a)
the Bankrupts' KiwiSaver Interests, including rights, interests and claims of every kind relating to the Bankrupts' KiwiSaver Interests, are property for the purposes of the Insolvency Act 2006;
(b)
as such, the Bankrupts' KiwiSaver Interests vest in the plaintiff on their bankruptcy under s 101 of the Insolvency Act 2006 regardless of the KiwiSaver end payment date for each Bankrupt;
(c)
this vesting is not prevented by any other legislative provision;
(d)
any increases in the value of, or additions to, the Bankrupts' KiwiSaver Interests between adjudication and discharge from bankruptcy vest in the plaintiff;
(e)
the Bankrupt's KiwiSaver Interests, including any that vested in the plaintiff on adjudication, and between adjudication and discharge from bankruptcy, do not revert to the Bankrupts upon discharge from bankruptcy;
(f)
the plaintiff can exercise any rights over property of the Bankrupts that the Bankrupts could have exercised, under s 101 of the Insolvency Act 2006. ”
[103]
As to declaration (g), I have noted that the Assignee can apply under the early withdrawal provisions of the KiwiSaver Act to the relevant trustee by exercising the bankrupts' rights over the bankrupts' KiwiSaver interest. Given my conclusions, I cannot make a declaration that the Assignee can access the bankrupts' KiwiSaver interest. The Assignee may be able to access the KiwiSaver interest under the early withdrawal provisions if the trustee accepts the Assignee's application.
[104]
Finally, I make a declaration (k) as follows:
“(k)
unless and until the Bankrupts' KiwiSaver Interests vested in the plaintiff are paid out to the plaintiff, the defendant is required to ensure that those Interests are accounted for separately from KiwiSaver interests that any of the Bankrupts might accumulate following discharge from bankruptcy. ”
[105]
I therefore refuse to make declaration (g), (h), (i) and (j), all of which relate to the significant financial hardship provisions.
[106]
I accept that this result is likely to be unsatisfactory for all parties. However, it is my assessment of the current law. These declarations have the following effect on a bankrupt's KiwiSaver account.
[107]
The value of a KiwiSaver account, accumulated up to and including the period of bankruptcy, vests in the Assignee. The Assignee will in each case need to apply to the trustee for early release of the KiwiSaver funds, if the Assignee considers that after bankruptcy the member's significant financial hardship will be or is likely to be alleviated by such a payment.
[108]
Where the application is granted by the trustee, then the Assignee will be free to use KiwiSaver funds to pay the bankrupt's creditors. Where the application is refused the Assignee will continue to have the bankrupt's KiwiSaver account vested in it. That account will consist only of the bankrupt's KiwiSaver interest until discharge from bankruptcy.
[109]
When the KiwiSaver account matures, typically at 65 years of age, the bankrupt's interest in KiwiSaver (being the separate KiwiSaver interest accumulated up to and including a discharge from bankruptcy) will be available to the bankrupt's creditors from the original bankruptcy. This will likely require two accounts for such a KiwiSaver member to be managed from discharge of bankruptcy until retirement.
[110]
Should there be a surplus of KiwiSaver funds in this event, then the surplus funds will need to be dealt with in accordance with relevant legislation at the time.
[111]
I accept this is an unattractive result for all concerned. Legislative reform is clearly called for.