KiwiSaver members took out more than 229.6 million dollars in early withdrawals during April, with 4410 New Zealanders pulling money out because of financial hardship, according to fresh figures from Inland Revenue.
The total dollar value of early withdrawals in April was 229,628,673 dollars across 8620 separate transactions, split between people buying their first home and people struggling to pay their bills, Interest.co.nz reported.
First home buyers made up 4220 of the withdrawals and accounted for the bulk of the dollar value at 191.1 million dollars. The remaining 4410 withdrawals were granted on financial hardship grounds, with a combined value of 38.5 million dollars. That works out at an average hardship draw of just over 8700 dollars per person.
The hardship numbers come at a politically charged moment for the retirement scheme. Both major parties have flagged changes to KiwiSaver as part of their pitch heading into the November general election, and the IRD data is being watched closely as a real time gauge of household stress.
The 833,223 members who had closed accounts or opted out by the end of April includes people who left because of death, permanent emigration, retirement and serious illness. Of that group, 644,030 had their accounts closed outright and 189,193 chose to opt out. There were 7221 new active or provisional members signed up in April alone, taking the total of active or provisional KiwiSaver members to 3,455,971.
Savings suspensions also remained high. Members can temporarily stop their contributions for a range of reasons, and in April there were 83,354 active suspensions in place. Of those, 1128 were classified as suspensions for financial hardship, which is a separate process to actually withdrawing money from the fund.
The 35 to 44 age band remained the largest demographic in the scheme with 765,460 members, just ahead of the 25 to 34 group at 734,297. The numbers reflect a generation that has been in KiwiSaver almost since the scheme launched in 2007 and is now reaching the years of peak mortgage debt, childcare costs and rising rates bills.
By scheme type, 2,595,755 members had actively chosen their fund, 640,956 sat in default allocated schemes and 207,064 were in employer nominated schemes. The default scheme cohort is the one regulators have historically been most concerned about, because those members are not engaging with their investment choice and can end up in funds that do not match their life stage.
The April hardship figures land just as the wider economy is under pressure on several fronts. ASB senior economist Kim Mundy said this week that the worst was yet to come for households dealing with the flow on effects from the Strait of Hormuz closure, with food, freight, plastics and farm inputs all expected to push higher over the coming months, RNZ reported.
“The broader story is how the entire cost shock, which includes fertiliser and petrochemicals, spreads through supply chains, lifting the cost of manufactured goods, packaging, freight and farm inputs, and the flow on effects of that to consumer spending,” Mundy said.
She said roughly a quarter of the New Zealand economy had high or very high exposure to at least two of the disruptions ASB had analysed, and that businesses needed to look beyond direct fuel use and assess exposure across suppliers, freight and packaging.
Mortgage costs are adding to the squeeze. Two year fixed home loan rates have lifted from a trough of around 4.5 percent at the end of last year to roughly 5.2 percent, and several commentators say further increases are baked into the wholesale market regardless of what the Reserve Bank does on Wednesday. Koura Wealth founder Rupert Carlyon told RNZ that two year swap rates had moved about 70 basis points since early March while advertised mortgage rates had only shifted about 20, meaning banks were wearing thinner margins and would not do so for long.
Against that backdrop, hardship withdrawals from KiwiSaver function as a kind of canary. The 38.5 million dollars taken out for hardship in April is small alongside the 191.1 million dollars taken out for first home deposits, but it is the figure that most directly reflects households that cannot make ends meet from their normal income.
The split also tells a story about how the scheme is being used in practice. KiwiSaver was originally designed as a retirement savings vehicle that members would access at age 65. The first home withdrawal pathway was added later and now accounts for the majority of early withdrawals by value. Some commentators have argued the scheme should be made more rigid to preserve retirement balances, while others say first home access remains a legitimate carve out because debt free home ownership is one of the best protections in retirement.
What the April numbers do not show is how many of the 4410 hardship applicants had already drawn down on KiwiSaver before, or how much of their balance was left after the latest withdrawal. The IRD does not publish that detail in its monthly summary, which makes it harder to judge whether the same households are coming back repeatedly or whether the hardship cohort is spreading wider into parts of the population that have not previously needed to dip in.
The next IRD update will cover withdrawals through May and is expected in late June. Most analysts expect the trend to continue while fuel costs, mortgage rates and grocery bills stay elevated.
What do you think, should KiwiSaver hardship withdrawals be tightened to protect retirement balances, or left available as a safety valve while the cost of living squeezes household budgets? Let us know in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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