'Extreme measure' - Large jump in people withdrawing KiwiSaver funds to survive

May 25, 2021

It’s highlighting the increasing inequalities caused by the pandemic.

There’s been a large increase in the number of people withdrawing KiwiSaver funds simply to survive, budgeting advisors working on the frontline say. 

In the year to the end of March, there was a 41 per cent increase in people taking money out for hardship reasons. That’s a rise from $112 million to $157 million. 

Salvation Army policy analyst Ronji Tanielu said the organisation was seeing more people, from all backgrounds, wanting to access their KiwiSaver. 

It's not easy to access KiwiSaver for hardship reasons. Applicants must prove they can't afford living expenses, are suffering a serious illness or need it to pay for a funeral. The money can’t be used to pay for fines or debt.

“What we're really concerned about is the trade-offs people are making,” Tanielu said.

“They're taking this extreme measure, which often they have to do because there is no other way to get money. 

“But, they are making this trade-off for something for the future versus what's in front of them now.”

He said people were struggling with rent, housing and food. 

Independent financial resource Sorted.co.nz said after last year’s pandemic, its website fielded a number of queries about accessing KiwiSaver. Most questions were about people trying to pay off their bills and debts. 

“We ask them not to make decisions based on fear and to think about all the options they have,” Sorted.co.nz website lead Kate Reddington said. 

Reddington said the funds should be a last resort, because it should be set aside for retirement. 

The number of people withdrawing money from their KiwiSaver has also increased by 17 per cent to $1.5 billion. Many of these withdrawals are from first home buyers. 

Infometrics senior economist Brad Olsen said it was a sign of inequality in New Zealand. 

“It's just this big divide we are seeing in New Zealand. Some people are able to get into the housing market … they are creating an asset, they’re creating wealth. Other people are struggling to make day-to-day bills.”

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