KiwiSaver hardship withdrawals: The real struggle behind the headlines
A woman who has gone through the hardship withdrawal process says claims that people are tapping into KiwiSaver frivolously are unfair.
The surge in hardship withdrawals has raised alarm in the KiwiSaver sector in recent years. Retirement Commissioner Jane Wrightson highlighted the issue in her latest three-year review of retirement income policy.
In October, KiwiSaver withdrawals for hardship reached $49.4 million, up from $38.4 million in October 2024.
In November, providers reported to RNZ that some people have learned to exploit the system to qualify for a withdrawal, such as letting debt fall into arrears to meet criteria.
Tara, a pseudonym used by RNZ, argues that suggesting applicants are shortsighted or splurging at the expense of their future security isn’t fair.
"As a former senior manager currently navigating this distressing process, I can assure you nobody dips into retirement savings on a whim," she says. "We do it because we are overwhelmed."
She shares her personal ordeal to illustrate why the hardship path is taken, even for those who have long planned carefully.
“I’m in my mid-50s and have spent my career being financially responsible. I contributed up to 10% of my salary to my KiwiSaver growth fund to secure a comfortable retirement, I prioritised paying off my mortgage to be debt-free by retirement, and I built a six-month emergency fund,” she explains.
When she was made redundant 13 months ago—her fourth redundancy in nine years—she didn’t panic. She lived on savings, scrutinised every expense, and even took a mortgage holiday to stretch every dollar.
The job market has shifted. With many people seeking work, each job ad can attract hundreds of applicants.
"After applying to more than 100 roles and securing only two interviews in over a year, my savings are nearly exhausted," Tara says. "I am two weeks from being unable to service my mortgage."
Her dilemma has moved beyond a simple choice between a stable retirement and a precarious one. It’s now about keeping a home versus losing everything.
The media often cites extreme examples of hardship withdrawals—like using funds for beauty treatments or selling a Range Rover—but Tara says those portrayals miss the reality for many desperate families.
"To the desperate, that beauty treatment might be the appearance needed to land interviews. That Range Rover could be a distressed sale to put food on the table or cover rent or mortgage."
Tara points to figures from 2025: 44,099 withdrawals so far that year,
and emphasizes that accessing funds is not easy. "The process is invasive and onerous. Applications are only considered when someone is effectively destitute—often with less than $3,000 in cash." She notes that the scrutiny includes the partner’s finances, even if the partner is not on the mortgage, title, or debt.
There’s no guarantee of approval, so as savings dwindle, stress rises, mental health can suffer, and sleep can vanish.
Her situation involves a two-year relationship with a partner who contributes to household expenses but is not on her mortgage or co-owner of property or debts. Still, his income is scrutinised because it affects overall household finances.
Applicants must also prove MSD (Ministry of Social Development) assistance has been exhausted—often a modest accommodation supplement for homeowners. From the government’s view, the individual is largely on their own.
Tara acknowledges the privilege of her previous earnings, but emphasizes that those gains were earned and rebuilt after leaving an abusive marriage. She has fought hard to regain financial independence and security. Seeing that stability erode so quickly, in the current economic climate and with limited government support, serves as a stark reminder that misfortune can touch anyone.
Judgment from outsiders is easy when there is steady employment. When deep into a recession and savings are drained, the long-term is not a luxury but a looming concern. Tara’s fear is concrete: not where she will be in ten years, but where she will be in two weeks.
David Verry, a financial mentor with North Harbour Budgeting Services, says it’s inappropriate to frame withdrawals as an easy option. He believes fraud is rare and the verification processes are robust.
People considering withdrawals typically explore every alternative first—boosting income, cutting expenses, deferring rates, renegotiating debt payments, or selling assets—before turning to KiwiSaver.
Verry has written to finance and social development ministers, cautioning that tightening or removing withdrawal criteria would alarm financial mentors. He notes his clients are usually in financial crisis, facing deficits and arrears on debts and obligations.
While some withdrawals are necessary, the ongoing rise in living costs without corresponding income increases has driven more applications.
The documentation required for hardship withdrawals is described as onerous, reportedly more burdensome than what would be required for taking out a loan.
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