Inland Revenue data shows that 3700 people withdrew from their KiwiSaver for financial hardship in April this year, compared to 1820 people in April 2023.
They withdrew a combined $30.1 million, well over double the $14.1 million withdrawn in 2023.
Since November 2023, the number of hardship KiwiSaver withdrawals began to outnumber first-home withdrawals consistently.
The rising cost of living, increasing interest rates, and economic uncertainty are reasons for the growing number of KiwiSaver hardship withdrawals, straining budgets and forcing people to access funds for essential expenses.
Withdrawing from KiwiSaver early impacts retirement savings, yet people are in such desperate need of financial assistance they cannot afford to think long-term.
To apply to withdraw, you need to provide evidence that you are suffering substantial financial hardship. Translation: you mightn’t be able to cover your minimum living expenses, pay for medical treatment, or pay for a dependent’s funeral.
The Rules
There are specific rules surrounding when a KiwiSaver provider can release money to someone on financial hardship grounds. While your KiwiSaver provider is who accepts the paperwork and processes the transaction, they don’t make the final decision.
That’s up to the Public Trust, Guardian Trust, or Trustee Executors. The amount that can be withdrawn is linked to what the supervisor deems enough to cover the hardship.
If someone withdraws on the grounds of being unable to cover their minimum living costs, the amount you can take is typically equal to about 13 weeks of expenses.
You can apply to use your KiwiSaver to clear arrears or keep up with payments when you don’t have enough money coming in, but you can’t use it to pay down debt.
Every provider operates within a similar set of rules, so despite social media coverage saying otherwise, one scheme is not more likely to approve an application than another.
KiwiSaver members should deal directly with their provider to manage an application as to avoid scams.
The increase in KiwiSaver hardship withdrawals shows the severity of growing cost-of-living crunches.
The government may need to consider additional support measures for those struggling financially. This could involve expanding access to hardship grants, increasing minimum wage levels, or exploring ways to make KiwiSaver more flexible while protecting its long-term purpose.
SPONSORED
