Concerns KiwiSaver Is Being Used As ‘Piggy Bank' To Solve Financial Woes
Article – RNZ
A growing number of New Zealanders are making hardship withdrawals from their retirement savings.
, Money Correspondent
KiwiSaver is in danger of being considered a 'piggy bank' to solve all of New Zealanders' financial woes, one provider says, and too many people are tapping into their savings on hardship grounds.
Founder of Kōura KiwiSaver scheme Rupert Carlyon was wary of calls for settings to be changed to allow people to use their money to buy farms.
He said KiwiSaver was already being called on to solve the country's housing and infrastructure crises.
Carlyon said changing the rules to allow more withdrawals sent the wrong message to people, who should be using KiwiSaver for their retirement.
Instead, they were tapping into KiwiSaver in growing numbers.
In April, 4220 people withdrew savings for financial hardship reasons, up from 3700 in April 2024. They withdrew a combined $37.6 million.
'It encourages more and more people to think about it like a piggybank. It's scary what's happening in that space,' he said.
He said he saw people making repeated hardship withdrawals, depleting their balance.
'People come back multiple times with the same claims… it's hard to figure out what's real and what's not.'
He said it would now not be possible to close the 'hardship loophole' because people expected it to be available and any change could dent confidence in the scheme.
But he said it should be tightened up so there was a limit on the number of withdrawals that could be made within a certain timeframe.
'The other part is it's very resource intensive. We spend on average up to six hours per financial hardship claim… It's hard on staff because they often have to say no when they want to say yes.'
A spokesperson for Public Trust, one of the KiwiSaver supervisors, said people were not required to repay hardship withdrawals if it was found they were not necessary.
'Their future self might not thank them for dipping into their retirement savings. We see situations of real and urgent need… there are strict rules and checks in place to help ensure withdrawals are only approved for genuine financial hardship, and applicants need to sign a legal declaration confirming their situation.
'If someone doesn't use funds as intended, it could affect their ability to make another hardship withdrawal in the future.'
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