KiwiSaver Hardship Withdrawals Boom - What You Need to Know
In the year ending June 2025, more than 50,000 New Zealanders accessed their KiwiSaver funds early due to financial hardship, the highest number ever recorded. This marks a significant rise compared to five years ago when only around 18,000 hardship withdrawals were made.
Why Are More Kiwis Withdrawing Early?
The surge in hardship withdrawals coincides with increasing cost-of-living pressures and economic uncertainty. Many Kiwis are facing challenges covering essentials like rent, power, groceries, and medical bills, leading them to tap into their retirement savings as a safety net.
The Numbers Behind the Trend
The average hardship withdrawal was approximately $8,800.
While this might provide short-term relief, it can lead to long-term consequences, potentially reducing retirement savings by $40,000 or more.
Hardship withdrawals have now surpassed first-home withdrawals for nine consecutive months.
Around 1.6% of KiwiSaver members made hardship withdrawals, but these withdrawals represent only about 0.3% of total KiwiSaver funds, meaning most members are still saving for their future.
What Counts as Hardship?
KiwiSaver hardship withdrawals are only granted for significant financial hardship, such as:
Being unable to pay for essential living expenses like food, power, or rent
Falling behind on mortgage or rent payments
Urgent medical or funeral expenses
It’s important to note that hardship withdrawals can’t be used to pay off general debts like credit cards or fines unless those debts are in arrears.
What Are the Risks?
Withdrawing from KiwiSaver early might ease financial stress today but can seriously impact your retirement. The amount withdrawn no longer benefits from employer contributions, government matching, or compounding growth. This means a relatively small withdrawal now could cost tens of thousands of dollars in lost retirement savings.
What Should You Do?
If you’re considering a hardship withdrawal:
Explore other options first, such as budgeting help, Work & Income support, or negotiating repayment plans.
Consider temporarily pausing KiwiSaver contributions instead of withdrawing funds.
Speak with a financial adviser to understand the full impact and explore alternatives.
Final Thoughts
KiwiSaver is designed to help Kiwis build a secure financial future. While hardship withdrawals can provide crucial relief during tough times, they should always be a last resort. Taking early money out can have a lasting effect on your retirement lifestyle.
If you’re facing financial difficulties or thinking about a hardship withdrawal, don’t hesitate to reach out. Getting professional advice can help you find the best way forward without compromising your long-term security.
Need help navigating your KiwiSaver options? Contact us today for expert advice tailored to your situation.