Official Assignee plans to tap bankrupts' KiwiSaver accounts

Friday, 13 November 2015

For now, creditors can't get their hands on bankrupts' KiwiSaver money, but that may change.

The Official Assignee has written to KiwiSaver providers to tell them how it plans to tap the Kiwisaver funds of bankrupts to pay their creditors.

When KiwiSaver was set up no thought was given to whether bankrupt's KiwiSaver funds could be used to pay creditors.

That led to a long legal fight between the Official Assignee (OA), which administers personal bankruptcies, and KiwiSaver trustee Trustees Executors, which earlier this year ended with a Court of Appeal ruling that bankrupts' KiwiSaver money did not 'vest' to the OA, and so was not available to repay their debts.

Now, law firm DLA Piper, which acted for Trustees Executors, has written to providers 'clarifying' its position on pursuing the KiwiSaver assets of bankrupts, which are substantial.

In January 2015 there were more than 5000 bankrupts with KiwiSaver accounts worth a total of $27.3 million.

DLA Piper partner Rachel Taylor said the OA's letter said that while KiwiSaver entitlements did not vest in the OA on bankruptcy, it could still summons people and request information.

It would be seeking information about 'irregular' contributions to KiwiSaver that may indicate an attempt to people to secrete funds in KiwiSaver just before they entered bankruptcy, which it could claw back.

The OA said it could claim any money paid to a KiwiSaver during bankruptcy, and said if a bankrupt died during their bankruptcy, it would head to court for a ruling on whether it can claim that money to repay creditors.

The OA was also looking to repay money received from KiwiSaver scheme providers before the Trustees Executors' case had ruled it was not entitled to it.

'The OA's letter does not state whether any amount will be paid to reflect lost income,' Taylor said.

Taylor said the Ministry of Business, Innovation and Employment was expected to issue a discussion document in the coming months to test whether the law on KiwiSaver and bankruptcy needs changing, or whether bankrupts' KiwiSaver money should remain ring-fenced for their retirements.