Financial hardship applications for KiwiSaver could spike up substantially in the second half of the year as the 12-week employer wage subsidy period comes to a close, experts predict.
Data for March shows 1958 hard-up Kiwis took a combined $12.7 million out of KiwiSaver accounts for hardship reasons compared to 1786 who took $10.24m in March 2019.
But that is only a tiny fraction of the three million people who belong to the scheme which has around $59 billion invested.
Claire Matthews, an expert in KiwiSaver at Massey University, said there was potential for there to be a "substantial increase in applicants" wanting to get their money out of KiwiSaver.
"I wouldn't expect to see much [increase] in the current quarter," she said.
"But come the first of July, when the support will disappear, that is when we will start to see an increase, in the latter part of the year."
That seems to be born out by figures from the ANZ - the country's largest KiwiSaver provider, which saw a drop in hardship applications during the level 4 lockdown period.
A spokeswoman for the bank said hardship applications fell 36 per cent between March 26 and April 23 compared to the same period last year.
"We expect this decrease is largely driven by people accessing other forms of financial support available during the Covid-19 crisis."
• Covid 19 coronavirus: KiwiSaver funds shrink by $4.5 billion to $59b in three months, most funds in red
• Let's Talk Law: KiwiSaver in troubling times
• Covid 19 coronavirus: All your KiwiSaver questions answered
• Kiwisaver: Shelley Hanna talks emergency funds
The ANZ spokeswoman said there was often a lag in accessing funds through KiwiSaver hardship as members had to show they were in financial hardship for a period of time before they could apply.
She said it was too soon to tell if Covid-19 would impact KiwiSaver hardship withdrawals.
"ANZ encourages customers to explore all options available before requesting access to their retirement savings, including utilising any Government or bank support first."
KiwiSaver has already been through one recession, in late 2007 through to March 2008. But at that time balances were small given KiwiSaver only launched in July 2007 with the first investment money allocated in October 2007.
Now the average balance was around $20,000.
Tom Hartman, money editor at the Government's money education arm, the Commission for Financial Capability, said that made it a tempting place to look to raid for those in debt and under pressure from job losses or a reduced income.
"I think there will be more applications (for financial hardship). Whether they are accepted is another thing altogether."
"If you have got a debt burden it feels a lot heavier in the Covid world, and your mind turns to KiwiSaver."
But he said under the current rules people could only claim hardship if they were not able to meet their day-to-day living expenses.
"It's not for paying off the mortgage but for making mortgage payments."
There have been calls made to change how the funds can be accessed for hardship reasons - with people applying but being rejected.
Katrina Shanks, chief executive of Financial Advice New Zealand said the purpose of KiwiSaver was for retirement.
She told Newstalk ZB's Heather du Plessis-Allan it could be accessed for hardship - but the bar was high.
"You've got to prove you can not service your debt in any way, shape or form to basically do that."
She said the pandemic was an unusual time - and there could be a case to adjust laws to grant people access to a portion of their fund.
However, Shanks said there is was a range of questions that would need to be answered first - noting the Government's still working to help people and businesses out in other ways too.
"It's how fast can the economy recover, how fast can people get back into jobs again, how fast can businesses pick up?
Hartmann said hardship withdrawals should be a last resort.
He said withdrawing money from KiwiSaver accounts at the moment could mean people crystallise loses and miss out on future investment growth that would help boost their money for retirement.
"The important thing to understand is that it can't be used to repay debt, that is important for everyone to realise. If you were going to use it to pay off debt then many people would not have retirement savings at all," he added.
Hartmann said the big variable that could impact how many people apply for hardship was ongoing Government financial support and the ability of businesses to keep employing people.
"What happens after the 12-week employer wage subsidy ends?"
Part of the agreement with employers who apply for the wage subsidy is to keep workers on, a move which has helped the number of newly unemployed remain relatively low so far.
But economists and Treasury have predicted it could hit double digits. The unemployment rate was 4 per cent at the end of last year.