KiwiSaver hardship withdrawals boom
RNZ
More than 50,000 people made withdrawals from their KiwiSaver accounts on the basis of hardship in the year to June - compared to about 18,000 five years ago.
KiwiSaver provider Simplicity chief economist Shamubeel Eaqub said the increase started in 2023 and the reasons were easy to understand - the recession and cost-of-living crisis were putting ongoing pressure on people's budgets.
"But some context - the number of hardship withdrawals were 1.6 percent members, and 0.3 percent of savings. The hardship, as is true for the wider society, is concentrated pain among a few," Eaqub said.
Sorted's personal finance lead Tom Hartmann told
Nine to Noon,
it was likely the ability to withdraw from KiwiSaver was giving people "peace of mind" that if their situation worsened they could draw on their savings.
Kiwisaver hardship withdrawals data from Simplicity.
Photo:
SIMPLICITY / SUPPLIED
He said the average withdrawal was $8800.
For someone in their 30s, earning $75,000 a year, a withdrawal of that size in a year could reduce their not-inflation-adjusted final balance by about $40,000.
Hartmann said there had not been an increase in savings suspensions, which indicated that the withdrawal was a temporary stop gap for people who would get back to making contributions.
Sorted's personal finance lead Tom Hartmann.
Photo:
Supplied
People can opt to stop contributing to KiwiSaver for a year at a time, and can renew the suspension at the end of the 12 months.
The number of people on a savings suspension had dropped from 89,000 a year ago to 85,000.
Hartmann said the key thing for people considering a withdrawal was to make it a last resort.
"Typically there are other sources of support that need to be explored first."
Financial helpline MoneyTalks was one option, he said.
"The team there have reporting seeing an increase in even middle-income people exploring their options."
Eaqub said for people making a withdrawal, it was often a choice between "certain hardship today versus more savings later in life".
But he said the situation was worse for those without KiwiSaver.
"Many low-income people do not contribute to KiwiSaver, because the employee contribution lowers their take home pay. But they also miss out on the employer contribution and government subsidies. It means when non-contributors face hardship, they do not have this fallback."
But Rupert Carlyon, founder of Koura KiwiSaver, said people on lower incomes could build up good balances.
"Someone earning $60,000 contributing 3 percent will end be putting in [about] $3500 per year, so over 10 years plus returns that really adds up.
"You can easily see a $60,000 salary becoming a $45,000 balance over 10 years. That is the power of KiwiSaver, we are often encouraging people to save that would not otherwise do it."
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