KiwiSaver: Early withdrawals double as purses put under strain

Increasing numbers of people have been forced to turn to raiding their KiwiSaver retirement funds to help make ends meet, IRD says. Photo / NZME

By RNZ

The money withdrawn early from KiwiSaver funds due to financial hardship has doubled compared with a year ago, with significantly more people taking money out before retirement.

Outside of using KiwiSaver savings to buy a first home or after retirement, applicants who want to access their money must prove they are in “significant financial hardship”.

This could include not being able to pay their mortgage or afford minimum living expenses, to pay for a funeral for a family member or due to serious illness or disability.

Latest figures show the number of KiwiSaver members making such withdrawals increased substantially from 1570 people in October 2022, to 2800 people in October 2023.

The amount of money withdrawn from KiwiSaver due to financial hardship doubled, from $10.3 million in October 2022 to $21.5m in October 2023.

IRD said the five regions with the most funds withdrawn for this reason were (respectively): Auckland, Canterbury, Waikato, Wellington and Bay of Plenty.

In August, a Retirement Commission survey found 55 per cent of New Zealanders reported being in financial difficulty, up 17 per cent since 2021. Women, Māori and Pacific peoples were affected the most.

Those results showed people were having trouble putting away savings, which would result in long-term consequences for their future financial well-being, Retirement Commission personal finance lead Tom Hartmann said.

Money taken from KiwiSaver accounts to purchase a first home also showed a significant increase in the latest IRD data, going from $77.7m in October 2022, to $104.7m in October 2023.

In March, The Financial Markets Authority said total membership in KiwiSaver had increased 2.7 per cent during the past year to 3.25m people, with $93.7 billion wrapped up in the scheme.