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Home / Business

KiwiSaver hardship withdrawals hit new heights amid cost of living crisis

Cameron Smith
By Cameron Smith
Online Business Editor·NZ Herald·
9 Jun, 2025 05:00 PM5 mins to read

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WATCH: Kiwisaver withdrawals soar as New Zealanders contend with the cost of living. Video / Herald NOW

Tens of thousands more New Zealanders are struggling under the cost of living crisis as KiwiSaver hardship withdrawals reach new highs.

Both the number of Kiwis making withdrawals and the amount taken out have smashed last year’s figures in just 10 months.

Inland Revenue figures show that between July 2024 and April 2025, more than $389.4 million has been withdrawn from KiwiSaver for financial hardship reasons, up from $300.5m in the year to June 30, 2024.

A total of 44,360 people have withdrawn money from KiwiSaver for hardship reasons, up from 32,480 in the previous financial year.

David Verry, financial mentor at Auckland Central Budgeting and North Harbour Budgeting Services, said it was no surprise to see those increases.

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“Across the board, we’re seeing increases in the number of people approaching us for KiwiSaver hardships,” he said.

“I’d have to say probably two out of three people that have approached me in recent times have always been looking for KiwiSaver hardship withdrawals.”

Verry said some financial mentors have seen a doubling of those seeking withdrawals over the last two years.

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There were now people fronting up for their second round of hardships, he said.

“I always look at the KiwiSaver hardship withdrawals as a Band-aid on a gaping wound. It’s there just as a short-term 13 weeks to cover your essential costs, deficits and your budget, but your underlying problem is still there typically,” he said.

Verry said KiwiSaver hardship withdrawals were a last resort for people.

“We never default to KiwiSaver hardship - you’ve got to exhaust all your other avenues first.

“Some of these numbers will include people who are seeking withdrawals to assist them when their mortgages have gone into arrears.

“There might be a combination of cost of living, mortgage arrears, people coming back for their second and, sometimes third, time back for withdrawals and, fourthly, just the understanding that KiwiSaver can be used for hardship purposes.”

Recent figures from Centrix showed mortgage arrears rose to an eight-year high in March. There remains more than 22,000 Kiwis behind on their mortgage repayments.

Verry encouraged people to have an emergency fund, even starting with $5 or $10 a week.

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“About every 10 years something comes along, it’s either Covid, a Global Financial Crisis … things we could have never predicted, but they happen,” he said.

Tom Hartmann, personal finance lead at the Retirement Commission, said the KiwiSaver hardship figures weren’t unexpected in an economic climate like this.

“That’s actually one of the reasons for KiwiSaver and it’s probably giving many people increased wellbeing just even knowing that if things went pear-shaped that they would be able to withdraw for hardship when they can’t meet everyday expenses,” he said.

But Hartmann said the implications of withdrawing money early was a big deal.

“It’s a much bigger deal than we realise because of the power of compound interest … so every time you do a short-term withdrawal you step away from those long-term possibilities.”

Using an example of a 35-year-old with $22,000 in KiwiSaver in growth funds, Hartmann said withdrawing $20,000 could leave someone by age 65 with $74,000 less in their account.

“It’s a lot to walk away from,” Hartmann said.

“If someone is doing it tough, there’s no reason why they shouldn’t [withdraw] if they’re in real need. That’s what it’s for. But hopefully they can get right back on the bandwagon with KiwiSaver and back to taking advantage.”

‘Pain still rippling through households’

Finance Minister Nicola Willis told the Herald that the increase in withdrawals correlates with rising unemployment over the past year.

“So it’s good to see the consensus forecasts pointing to declining unemployment later this year. More people in work means greater financial security for Kiwis,” she said.

“I understand and sympathise with those people who choose to make KiwiSaver withdrawals for financial hardship reasons. While KiwiSaver exists to foster retirement savings, I fully appreciate that sometimes people need to access those funds due to challenging personal circumstances.”

Willis said the Government had inherited a cost-of-living crisis created by Labour’s post-Covid spending spree.

“That pain is still rippling through many households.”

Willis said the Government’s priority is economic growth.

“Because growth creates jobs and drives wages higher.

“The key to bringing down the cost of living is getting the economic fundamentals working again. That means putting a lid on inflation, which in turn lowers interest rates and the cost of mortgages and other debts people may have.”

Labour’s finance spokeswoman Barbara Edmonds said Prime Minister Christopher Luxon promised that a National Government would make the cost of living better, but instead was making it worse.

“Thousands of New Zealanders are now being forced to dip into their retirement savings just to get by,” Edmonds said.

“Families are doing the maths – cutting back where they can and making the heartbreaking decision to sacrifice some of their retirement to pay the bills.

“National’s plan to halve the Government’s KiwiSaver contributions is only going to make it worse and shows just how out of touch Luxon is with people’s lives.”

Cameron Smith is an Auckland-based journalist with the Herald business team. 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.

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