KiwiSaver hardship withdrawals: 'Worried where I will be in two weeks'
Photo: RNZ
A woman who has personally navigated the process of withdrawing KiwiSaver funds for hardship reasons says it’s unfair to label applicants as frivolous or shortsighted.
The surge in hardship withdrawals has drawn attention from the KiwiSaver sector in recent years. Retirement Commissioner Jane Wrightson highlighted the trend in her latest three-year review of retirement income policy.
In October, withdrawals for hardship reasons totaled $49.4 million, up from $38.4 million in October 2024.
In November, providers told RNZ that some people had learned how to maneuver the system to secure a withdrawal — for example, by allowing debt to fall into arrears so it becomes eligible.
Tara, a pseudonym used by RNZ for privacy, argued that suggesting applicants are shortsighted or wasteful at the expense of their future comfort is unfair.
"As a former senior manager who is currently going through this distressing process, I can assure you nobody exits retirement savings on a whim," she said. "We do it because we are drowning."
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"I am in my mid-50s and have built a career around financial responsibility. I contributed as much as 10 percent of my salary to my KiwiSaver growth fund to ensure a comfortable retirement, prioritized paying off my mortgage to be debt-free by retirement, and diligently built a six-month emergency fund.
When I was made redundant 13 months ago — my fourth redundancy in nine years — I didn’t panic. I lived off my savings, scrutinized every expense, and even took a mortgage holiday to stretch every dollar."
She noted that the job market has shifted. With many people seeking work, each job advertisement attracts hundreds of applications.
"After 100-plus applications and only two interviews in the past 13 months, my savings are nearly exhausted," Tara said. "I am two weeks away from being unable to service my mortgage.
My decision is no longer about a comfortable retirement versus a poor retirement — it’s about keeping my home versus losing everything."
The media often highlights extreme examples, such as people using KiwiSaver hardship withdrawals for beauty treatments or for failing to sell a Range Rover. To outsiders, these may appear as luxuries.
For the desperate, that beauty treatment might be the grooming needed to present well at interviews. The Range Rover, if sold in distress, might have failed to fetch enough to cover basic needs like food, rent, or the mortgage.
These are real cases from 44,099 withdrawals recorded in 2025 so far.
She emphasized that access to funds is not easy.
"The process is invasive and onerous. The moment of applying arrives only when destitution is near — when there is less than $3,000 cash left. You must expose your entire financial life, including your partner’s financial details. There’s no guarantee the hardship withdrawal will be approved, so as savings dwindle, stress climbs, mental health suffers, and dark thoughts creep in. Sleep vanishes."
In her situation, her partner of two years and she maintain separate finances — he is not on the mortgage title, nor does he co-own her property or debts. Yet his modest income is scrutinized simply because he contributes to household utilities, despite being unable to cover her mortgage obligations legally or financially.
Proof of exhausting all MSD (Ministry of Social Development) options is required — which, for a homeowner, often yields only a small accommodation supplement and little else. From the government’s perspective, she is largely on her own.
She acknowledges the privilege of her previous earning power, but notes that this stability was built over a decade after escaping an abusive marriage.
"I fought hard, on my own, to regain financial independence and secure my future. Watching that hard-won stability crumble so quickly, despite continued financial discipline, is a stark reminder that in today’s economic climate with limited government support, no one is immune to misfortune."
She argued that judging others is easy when employment is secure.
"When in the trenches of a recession and savings are depleted, thinking long-term becomes a luxury that cannot be afforded. Critics ask where I will be in 10 years; I’m focused on where I’ll be in two weeks."
North Harbour Budgeting Services financial mentor David Verry agreed it’s incorrect to claim withdrawals are easy. He described fraud as rare and the processes as robust.
People considering a withdrawal typically examine all options first — increasing income, trimming expenses, deferring rates, reviewing debt payments, and selling assets.
Verry wrote to the ministers of finance and social development, warning that financial mentors would be alarmed if withdrawal criteria were tightened or removed.
"Our clients are generally in financial crisis," he said. "Budgets run deficits, with debts and arrears.
We have historically had some clients needing KiwiSaver hardship withdrawals, but the ongoing rise in the cost of living without proportional income increases has driven more applications."
The documentation required is burdensome, he noted, perhaps more so than what would be needed to borrow money.
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