KiwiSaver and bankruptcy - letter from the Official Assignee

Finance Update

By:

Following recent litigation, where DLA Piper New Zealand acted for a KiwiSaver provider in the test case taken by the Official Assignee (OA) (read more in our April 2015 update), the OA has written to providers clarifying its position on a number of points.

They are: 

  • While the Court of Appeal (Court) found KiwiSaver entitlements did not vest in the OA on bankruptcy, the OA can still summons people and request information. 
  • Money paid to a KiwiSaver during bankruptcy can be claimed by the OA (this is relevant to serious financial hardship and serious illness payments). 
  • It is not clear what happens if a bankrupt dies during bankruptcy - does the death benefit vest in the OA? The OA acknowledges that this needs to be resolved by the Court (a review of the legislation may be preferable). 
  • The OA is looking to repay amounts, paid to it before the test case was decided, to KiwiSaver Managers. This may result in additional administration. The OA's letter does not state whether any amount will be paid to reflect lost income. The OA will seek information about irregular contributions to KiwiSaver that may indicate an attempt to secrete funds in KiwiSaver prior to bankruptcy (which is prohibited by the Insolvency Act 2006). 
The Ministry of Business, Innovation and Employment is expected to issue a discussion document in the coming months. 

If you would like to discuss any of these points, and how they affect KiwiSaver providers, please contact us.