“That trend really started a couple of years ago, so we’ve been seeing that since early 2023. And that really coincides with that period of economic hardship.
“Initially it was about cost of living, when inflation rose very sharply… then of course the recession - when we’ve seen quite a big set of job losses and that wider hardship.
“[Hardships] used to be under about 2000 a month and we’ve been closer to 4500 a month in the last little while, so [that] gives you a sense of just how much hardship there is.”
Eaqub said redundancies were the biggest driver of hardship in the past year.
“There’s a bunch of reasons, but really it’s about that big increase in job losses over the course of the last couple of years.
“While the overall rate of inflation has slowed, the cost of living is still really high. So, what we’ve seen is the rate of growth… costs are not increasing as fast as before but they’re still very expensive. Particularly for things like food.
“Food prices are up around 4.5% [in the last year], people’s incomes are not rising that fast.”
Eaqub called it a “double whammy”.
“When the economic conditions are weak, it tends to affect people in more than one way.
“It’s around 0.3% of all KiwiSaver members. So, it’s gone up a lot since the pre-Covid years when it was 0.2%.
“It’s a small number of people who are experiencing a lot of hardship.”
He said the average amount withdrawn is about $9000.
“[People] are taking out what they can to cover their outstanding debts and making sure they’ve got money left over,” Eaqub said.
Eaqub said this can have implications on retirement savings later in life.
“I guess it’s choosing between financial hardship today versus financial hardship potentially later. And that’s the trade-off that you have to make.
“If you’re in hardship today, then it is no good saying that in 20 or 30 years time I’m going to have a better retirement if you’re living in poverty today.
“Quite often we’re talking about people who have relatively small balances.”
Those contributing to KiwiSaver were also better insulated for when hardship hits.
“Quite often the people who don’t [contribute] are on low incomes. And for them they are missing out on the employee contributions, the Government contribution.
“Those people who have been contributing to KiwiSaver are better off in the sense that, at least they have these pre-cautionary savings and they’ve saved a lot more income they might have otherwise had.
“So, they may not have more money in retirement but they will at least have more money in hardship today.”
Cameron Smith is an Auckland-based business reporter. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.
