‘Crazy’ increase in KiwiSaver hardship withdrawals as NZers

New Zealanders are withdrawing money from their KiwiSaver schemes to help them through financial hardship at twice the rate of last year – and one supervisor says it’s largely because of rising interest rates.

Data from Inland Revenue shows that there was $21.5 million withdrawn from KiwiSaver accounts for reasons of financial hardship in October, up from $10.3m in October 2022.

That is compared to an increase from $77.7m to $104.7m over the same period for first home withdrawals.

David Callanan, general manager of corporate trustee services at Public Trust, said there had been a “crazy” increase in the number of applications being received.

“We’re clearing more than a thousand a month regularly now and that would have been absolutely unheard of before Covid. That’s just becoming absolutely the norm now.”

Public Trust is supervisor of 11 of the 23 KiwiSaver schemes, including four of the default schemes. Its data shows that in the 2021 financial year, there were 1047 serious illness and 8758 serious financial hardship applications, to a total of 9805.

The following year, that dropped to 927 serious illness and 6267 financial hardship, or a total of 7194.

In the 2023 financial year, it jumped to a total of 10,321 of which 9165 were serious hardship, and in the 2024 year so far, which includes July to October, there had already been 4451 applications, of which 4071 were serious financial hardship.

If the year-to-date data was extrapolated for the whole year, it would mean more than 13,000 applications processed, or twice that of 2022.

Callanan said it used to be that a change in employment circumstances was the main driver for an application. Now, many people were still in the same jobs but struggling with things like higher interest rates. “They were not prepared, have not budgeted... their home loan rolls over and payments go up, and they’re just not able to cope.”

He was concerned it was a trend that was not sustainable. “Particularly when contribution rates are already so low.”

People who were applying to withdraw their money were trading off short-term and long-term wellbeing, he said, because it would reduce the money they had

available at retirement.

Callanan said the rules around withdrawals were tight for that reason.

“The measure of financial hardship is significant financial hardship occurring or