Warning for first home KiwiSaver buyers

Alison Schwencke, husband Jeff, and their two boys Harper and Dallas have just moved into their first home with the help of KiwiSaver. Photo / Supplied

People who raid their KiwiSaver accounts to buy a home may be putting a comfortable retirement at risk, experts are warning.

More than 100,000 people have used KiwiSaver to buy their first home since the scheme launched in July 2007, taking out more than $1.7 billion.

But the average amount people are taking out has spiked in the wake of a government change in 2015 which allowed people to take out all of their money bar $1000.

In 2014 the average withdrawal was $12,500. In the 10 months to April 30 it has gone over $20,000.

Despite house prices in Auckland being higher, Wellington first home buyers had the highest withdrawal rate across the country at $22,520.

Claire Matthews, a KiwiSaver expert at Massey University said first home withdrawals could make it harder to save for retirement, especially for older savers.

"If you are doing it in your 20s I've got no concern about it. Early 30s - you've still got time to catch up.

"But once you get to 35 it is starting to get difficult. Over 40 then I would be really nervous."

Matthews said a person taking their money out in their 40s would only have 25 to 30 years to save for their retirement.

"That is quite different to 45 years."

She said older home-buyers could help themselves out by leaving some of their savings in KiwiSaver and saving more.

She also urged people to save for a home outside of KiwiSaver.

"Don't rely only on KiwiSaver for house savings."

Figures obtained by the Herald show in the 11 months to May 31, $592m had been taken out of KiwiSaver for home withdrawals.

That was up from $495m in the year to June 30 2016.

Those figures had skyrocketed from $258m in the year to June 2015 and $159m in the year to June 2014. The figures did not show how old the borrowers were.

Julian Lingard, a financial adviser with Lifetime, who advises people on both mortgages and KiwiSaver, said he was also concerned about the number of people asking to take contribution holidays after buying their first home.

"I think there is a real danger if you don't remain committed to saving that money."

Lingard said many increased their contributions to 8 per cent to save for a house but then wanted to cut it back to the 3 per cent minimum afterwards.

"They should really be leaving it."

The risk if they didn't was ending up with a lot less money in their account at retirement, he said.

"You don't know what is going to happen with New Zealand Superannuation."

While current governments were promising not to change it, that could be different in the future, he said.

"People need to take responsibility for themselves, not rely on getting the same amount of NZ Super that retired people get now."

David Boyle, group manager investor education at the Commission for Financial Capability, said owning a home was part of being in a good position when it came to retirement and the key was continuing to save after buying a home.

"If you are going to be in good shape for retirement there is no doubt you are going to be in a better position if you have a mortgage free house."

First home buyer to drop KiwiSaver saving rate

Alison Schwencke says she will keep saving for retirement after using money from her KiwiSaver account to buy a home but will reduce how much she saves.

The 32-year-old and husband Jeff took just under $30,000 out of their KiwiSaver accounts to buy a property in Kawerau, which they moved into last weekend with their two sons Harper and Dallas.

She says without KiwiSaver they would have had to wait years longer to save up a deposit for their first home.

As well as using their own KiwiSaver savings they got $8000 through the Homestart grant and had additional savings outside of KiwiSaver to buy the house which cost $270,000.

The family had been living in Hamilton for the last five years and originally planned to buy a home in Whakatane - Alison's home town - but settled on Kawerau as a more affordable option.

"When we started looking we realised unless we wanted a heavy mortgage, we would have to look elsewhere."

The couple both drained their KiwiSaver accounts taking out everything bar the $1000 which has to be left in there.

She says they plan to continue contributing to KiwiSaver but will drop their contribution rate down from 8 per cent to 3 per cent after bumping it up to boost their deposit.

"We can afford to do so. But we will probably bring it down to 3 per cent because it is not as necessary to keep it high."

Schwencke said she had not thought about how much the couple might need to live off in retirement.

"To be honest I haven't researched it. Hopefully my sons will just look after me," she joked.

For now she said the couple hoped to just enjoy life with their children after a tough period of having to save for their first home.