A woman who has been through the process of withdrawing money from KiwiSaver for hardship reasons says suggestions that people are doing so frivolously are unfair.
The sharp increase in hardship withdrawals has concerned the KiwiSaver sector in recent years and Retirement Commissioner Jane Wrightson highlighted it in her recent three-yearly review of retirement income policy.
In October, $49.4 million was withdrawn from KiwiSaver funds for hardship reasons, up from $38.4m in October 2024.
In November, providers told RNZ that people had learned to manipulate the system to enable a withdrawal – such as letting debt fall into arrears, so it would qualify.
Tara, for whom RNZ is using a pseudonym, said suggesting applicants were shortsighted or frivolously spending at the expense of future comfort wasn’t fair.
“As a former senior manager currently navigating this distressing process, I can assure you nobody dives into their retirement savings on a whim,” she said. “We do it because we are drowning.”
“I am in my mid-50s and have spent my career being financially responsible. I contributed as much as 10 percent of my salary to my KiwiSaver growth fund, so I could be comfortable in retirement, prioritised my mortgage, so that I could be debt free by retirement, and diligently built a six-month emergency fund.
“When I was made redundant 13 months ago – my fourth redundancy in nine years – I did not panic. I lived off my savings, scrutinising every spend and even took a mortgage holiday to stretch every dollar.”
She said the job market had changed and, because a lot of people were looking for work, each job ad would receive hundreds of applications.
“After 100-plus applications and only two interviews over the past 13 months, my savings are almost gone,” Tara said. “I am two weeks away from being unable to service my mortgage.
“My choice is no longer ‘comfortable retirement v poor retirement’ – it is ‘keep my home v lose everything’.
“The media often cites extreme examples, such as applicants using KiwiSaver hardship withdrawal funds for beauty treatments or for failing to sell a Range Rover. These sound like luxuries to the observer.
“To the desperate, that beauty treatment might be the appearance maintenance required to present well at interviews. That Range Rover is likely a distressed sale that didn’t move fast enough to put food on the table, or pay the rent or mortgage.
“Two examples from 44,099 withdrawals so far in 2025.”
She said any suggestion accessing funds was easy was false.
“The process is invasive and onerous. You cannot apply, until you are effectively destitute – less than $3000 cash to your name.
“You must open your entire life to scrutiny, including providing the financial details of a partner. There is no guarantee that the hardship withdrawal will be approved, so as you watch your savings dry up, your stress levels ramp up, your mental health suffers and dark thoughts often crowd your mind.
“Sleep is non-existent.
“In my case, my partner of two years and I have completely separate finances – he is not on my mortgage title, nor does he co-own my property or debts. Yet, because he contributes to household utilities, his very modest income is scrutinised, even though he cannot legally or financially cover my mortgage obligations.
“You must also prove you have exhausted all help from MSD [Ministry of Social Development] – help that, for a homeowner, often amounts to a negligible accommodation supplement and nothing more. From the government’s point of view, I am on my own.
“I readily acknowledge the privilege of my previous earning power. However, that financial position was not gifted to me – it was rebuilt from the ground up over the last decade, after I escaped from an abusive marriage.
“I have fought hard, on my own, to regain my financial independence and secure my future. To see that hard-won stability erode so quickly, despite my financial diligence, is a stark reminder that, in this economic climate and very limited support from the government, no-one is immune to misfortune.”
She said it was easy for people to judge, when they were comfortably employed.
“When you are in the trenches of a recession and have exhausted your savings, the long term is a luxury you literally can no longer afford. Critics worry about where I will be in 10 years – I am worried about where I will be in two weeks.”
North Harbour Budgeting Services financial mentor David Verry agreed it was wrong to suggest withdrawals were an easy option. He said fraud was very rare and the processes were robust.
People considering a withdrawal would look at all options first, including increasing income, cutting expenses, deferring rates, reviewing debt payments and selling assets, he said.
Verry wrote to the ministers of finance and social development, telling them financial mentors would be alarmed, if the criteria for a withdrawal was tightened or removed.
“Our clients are generally in financial crisis,” he said. “Budgets will be in deficit, and many will have debts and obligations that are in arrears.
“We have always had some clients needing to access their KiwiSaver for hardship purposes, but the ongoing cost of living increases, without commensurate increases in incomes, have seen the applications ramp up.”
The documentation required was onerous, he said.
“Arguably, the requirements are more than if a client was borrowing money.”
rnz.co.nz
