Should a bankrupted person's retirement savings be made available to repay creditors?

The Ministry of Business, Innovation and Employment is now considering how a bankrupt persons' retirement savings should be treated and is calling on the public to have their say on the issue.

Commerce and Consumer Affairs Minister Paul Goldsmith. Photo: beehive.govt.nz

Commerce and Consumer Affairs Minister Paul Goldsmith says currently some bankrupts' retirement savings are released to repay creditors while other are allowed to retain their savings.

'I am releasing a discussion document looking at how retirement savings are treated during bankruptcy. I am seeking a policy solution that can be evenly applied across all retirement savings schemes including KiwiSaver,” he explains.

'Insolvency policy and retirement savings policy have conflicting goals. Insolvency policy aims to utilise the value of all available assets so creditors are repaid during bankruptcy, while retirement savings policy encourages people to accumulate assets to fund their retirement.”

The discussion document puts forward three options to create a clear and consistent policy for how retirement savings are treated.

The first option would see retirement savings, except for Crown contributions, used to repay creditors, while the second would personal contributions to retirement savings used to repay creditors while employer and Crown contributions would be retained by the bankrupt.

While the third option involves a set percentage of retirement savings be used to repay creditors, with a percentage be retained by the bankrupt, regardless of whether personal, employer or Crown contributions.

Paul says the options have been created in order to start the discussion and he welcome all feedback and alternative options.

'Submissions will be looked at by the Ministry of Business, Innovation and Employment which will then put forward a proposal to me before final decisions later in the year,” says Paul.

The consultation period is now open and will up until Friday, September 30.

For more information or to make a submission visit the Ministry of Business, Innovation and Employment website.