More Northlanders are accessing their KiwiSaver accounts to pay off debt due to the cost of living crisis.
More Northlanders are accessing their KiwiSaver accounts to pay off debt due to the cost of living crisis.
The number of Northlanders dipping into their KiwiSaver funds due to financial hardship has more than doubled over the past three years.
Concerns are being raised that many people will be woefully unprepared for retirement.
There was a 109% increase in Northlanders withdrawing funds from KiwiSaver due tosignificant financial hardship from 2022 to 2024.
The dollar amount withdrawn also rose from $3.9m in 2022 to $10.9m in 2024 - a 176% increase.
Figures from the Inland Revenue Department (IRD) show more than $10.9 million in KiwiSaver funds was withdrawn by 1150 Northland members in the year to June 2024.
That was an increase from 830 KiwiSaver members withdrawing just over $7m in 2023, and 550 Northland members withdrawing $3.9m in 2022.
Whangārei Budgeting Service chief operations officer Adam Dade said the service had seen a 22% rise in people wanting to withdraw, citing significant financial hardship.
Most withdrawal requests were to pay down debt or buy a vehicle, he said.
“People are getting desperate and are hoping to access the funds like a long-term savings account rather than the intended retirement fund.
“We understand this position as a lot of people do not have a choice with the increased cost of living on all everyday expenses.”
Whangārei Budgeting Service chief operations officer Adam Dade said some Northlanders wanted to access their KiwiSaver funds like a savings account rather than the intended retirement fund.
While KiwiSaver was a valuable investment in people’s futures, “the current system focusing on retirement and first home ownership is unattainable with the extreme levels of hardship we are seeing”, Dade said.
The Government recently increased the default KiwiSaver contribution rate for employees and employers from 3% to 3.5% starting April next year, and 4% from April 2028.
The Government also halved its contribution to $261 per year.
There are 110,684 Northlanders in KiwiSaver as of July 2024, according to the IRD.
People can access their KiwiSaver funds when they turn 65, the retirement age.
KiwiSaver users can only withdraw money early to buy a first home, or if they are experiencing significant financial hardship such as being unable to pay the rent or mortgage, serious illness or disability, or paying for a family member’s funeral.
Whangārei Care Centre co-ordinator and financial mentor Dianne Harris said they were frequently dealing with hardship withdrawals..
Between February and June, about two dozen people had requested to access their funds, mainly to get out of debt, she said.
Whangārei Care Centre co-ordinator Dianne Harris is concerned Northlanders who access their KiwiSaver funds too early will be vulnerable in their retirement years.
One person wanted their retirement money to buy a new car, and only a few applied for genuine medical reasons, such as purchasing cancer drugs, she said.
Harris said making withdrawals was too easy.
“People who find they are struggling think this is the easy way out, but it’s not.
“I can see huge benefits for KiwiSaver but it’s become one of those things where people think, if they’ve made a few bad choices, ‘hey, I’ll go and get my KiwiSaver out’.”
Harris said Northlanders needed to look at their spending habits.
“A lot of it is unwise choices - it’s not hardship.”
Harris was concerned people would be vulnerable in their retirement years.
“When it comes to retirement at 65, if you stop work, suddenly you’ve only got the pension [$538 less tax for singles and $828 less tax for couples].
“If you’ve got no savings, you’ve got to live on that.
“That’s hard.”
Financial adviser Shaun Curtis, from Craigs Investment Partners in Kerikeri, had also noticed an increase in KiwiSaver withdrawals as Northland’s population grew and clients reached the eligibility age.
“We see people needing to dip into their savings from time to time, to get through a tough patch or support their families.
“Investing is a long-term strategy, and these setbacks can sometimes be absorbed in the long run.”
Dade said financial mentors only supported accessing KiwiSaver early as a last resort.
He urged people to seek advice to find solutions “without resorting to this drastic measure”.
Jenny Ling is a senior journalist at the Northern Advocate. She has a special interest in covering human interest stories, along with finance, roading and animal welfare issues.
