The Government fears the rules are disadvantaging the likes of farm workers, rural teachers, country police, defence personnel, health professionals, clergy and diplomatic staff, who can’t always live in the homes they own.
So, it is proposing to make a carve out in the rules to enable those on service tenancies, whose jobs come with accommodation they either do or don’t pay for, to make withdrawals from their KiwiSaver accounts for their first homes.
Finance Minister Nicola Willis said the status quo was unfair.
“So, we’re making a technical change to the KiwiSaver Act to ensure workers in service tenancies aren’t denied the opportunity to put a foot on the property ladder,” she said.
As Willis signalled mid-last year, the Government is also moving to allow KiwiSaver withdrawals for farm purchases.
It recognises farmers can’t always meet the requirement of buying a first home under their own name, as farmland is typically bought through a commercial vehicle.
So, it is planning to allow farmers to use companies, trusts, or partnerships (provided they have majority ownership and control of the entity used to make the purchase) to buy their first homes with the help of the savings in their KiwiSaver accounts.
Farmers will also need to live on the property.
Under the proposal, “farmland” will be defined as land used exclusively or principally for agricultural, horticultural, or pastoral purposes, or for the keeping of bees, poultry, or livestock.
The idea is that people won’t be able to use their KiwiSaver accounts to buy forestry blocks, unless forestry (or any other non-farm commercial activity) makes up a small part of the land that is primarily used for farming.
Commerce and Consumer Affairs Minister Scott Simpson said the proposed changes would “deliver on the Government’s commitment to back rural New Zealand and remove unnecessary barriers”.
“These are targeted, practical changes that maintain KiwiSaver’s core purpose, while making the scheme fairer for rural communities.”
The proposed amendments were sparked by a Member’s Bill in the name of National Party Rangitīkei MP Suze Redmayne.
While Federated Farmers had called for the Government to change KiwiSaver settings, fund managers had warned against tinkering too much with the scheme.
In late-November, Financial Services Council chief executive Kirk Hope told the Herald, “weakening withdrawal rules sends a contradictory message that risks trust, participation and long-term savings behaviour”.
“If New Zealanders are asked to save more, they need certainty that KiwiSaver remains a secure, dedicated retirement fund,” he said.
Hope said the scheme’s credibility and integrity were especially important given the Government’s decision to increase the default KiwiSaver contribution rate from 3% to 3.5% in April this year, and 4% in April 2028 (for employees and employers).
Furthermore, the National Party is campaigning on progressively lifting the default contribution rate to 6% by April 2032.
Massey University’s head of accountancy, economics and finance, Claire Matthews, had similar concerns about eroding trust in KiwiSaver.
She feared allowing withdrawals for farms could open a can of worms – sparking KiwiSaver members to argue they should be able to tap into their retirement savings to invest in other assets, beyond housing.
In late November, NZ First said it was “very reluctant to expand the use of KiwiSaver withdrawals”.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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