Most people who ask to pull money out of their KiwiSaver account because they are in trouble do not end up taking it. In a new report covering the year to March 2026, the debt help service Debtfix said it received 5,964 referrals from the KiwiSaver schemes it works with, all of them from people seeking a hardship withdrawal. Of those, 2,516 went on to be approved. Another 3,450, or 57.9 percent, were supported through some other solution instead.
The schemes using Debtfix to handle that workload are Simplicity, Milford, SuperLife and NZ Funds, RNZ reported. Debtfix said getting at KiwiSaver was not always the most appropriate or sustainable answer to the problem in front of someone. The alternatives it pointed to include applying to creditors for a hardship arrangement, negotiating a debt repayment plan, a no asset procedure, or simply building a budget and a cash flow plan that works.
That matters because the number of people reaching for their retirement savings early has been climbing for years. Inland Revenue figures show that in July 2026, $45.2 million was withdrawn for financial hardship, up from $43.2 million in July 2025. The number of members doing it rose from 4,950 to 5,110 over the same month a year apart. That works out at an average hardship withdrawal of roughly $8,845, up a little on the $8,727 average a year earlier.
The comparison with first home buyers is the one that tends to get noticed. In July, 5,110 members took money out because they were struggling and 4,660 took money out to buy their first house. More people used KiwiSaver as an emergency fund that month than used it for the purpose most savers have in mind when they sign up. The dollars still lean heavily the other way, because a first home withdrawal averaged about $46,100 against roughly $8,800 for hardship, so hardship made up just over 17 percent of the $260.1 million that left KiwiSaver accounts in July for those two reasons combined.
Step back a decade and the change is stark. In the financial year to June 2025, Inland Revenue counted 45,870 members withdrawing savings on hardship grounds, worth $471.2 million. In the 2015 financial year the equivalent figures were 8,250 members and $41.1 million. The number of people has multiplied more than five times over. The amount of money has multiplied more than eleven times. Some of that is simply KiwiSaver maturing, with bigger balances available to draw on and more members in the scheme, but the balances being taken have grown faster than the headcount, which suggests people are taking larger sums when they do get approved.
Hardship is not a loose test. Inland Revenue sets out the grounds, and they cover being unable to meet minimum living expenses, being unable to pay the mortgage on the home you live in while the lender moves to enforce it, needing to modify a home for your own special needs or those of a dependent family member, needing to pay for medical treatment, having a serious illness, funeral costs for a dependent family member, and palliative care. Applicants have to provide evidence that they are suffering significant financial hardship. Even when an application succeeds, Inland Revenue says only the member’s own contributions and their employer’s can be withdrawn, so government contributions stay put.
Applicants are also meant to have exhausted their other options before they apply, and that is where a lot of the Debtfix caseload appears to be going. Simplicity chief economist Shamubeel Eaqub said people had sometimes not considered the alternatives before putting in an application.
ANZ, the country’s biggest KiwiSaver provider, said it treated helping members through hard times as part of the job. “When people reach out to us because they’re under financial pressure, our focus is on understanding their circumstances, helping them explore the options available, and providing support through what can often be a very stressful time. We also support members through the hardship withdrawal process itself and can assist them with their application,” a spokesperson said.
The bank gave a sense of how much of that work never turns into a withdrawal. “Between December 2025 and July 2026, our KiwiSaver Contact Centre received almost double the number of contacts relating to financial hardship as actual hardship withdrawals. These included enquiries about existing applications, the hardship withdrawal process, and eligibility requirements.” ANZ cautioned that the same customer often rings more than once and that enquiries cover a wide range of topics, so the figures cannot be read as the share of customers who end up withdrawing.
ANZ said it agreed applications should only be made once every reasonable alternative had been tried. “Applicants need to demonstrate they have explored other reasonable avenues of support, which may include using available savings, cashing in investments or shares, seeking assistance from their bank, or approaching WINZ for support,” the spokesperson said.
The reasons people are turning up have shifted too. Debtfix said people were increasingly seeking assistance not because of their own financial decisions, but because they had run out of resources to cope with rising costs. Losing a job or having hours cut were among the most common triggers. It also said it was seeing more people in sustained hardship rather than dealing with a one off financial shock, which is a harder problem for a lump sum to fix, because the money runs out and the pressure does not.
That is the real argument for sending people somewhere else first. A hardship withdrawal is not free money. It is retirement savings pulled forward, and the decades of compounding growth that money would have earned go with it. An $8,800 withdrawal at age 40 is worth a great deal more than $8,800 at 65. If the underlying problem is an unaffordable debt load or a permanent drop in income, a repayment arrangement or a no asset procedure deals with the cause while the KiwiSaver balance keeps working. If you are trying to rebuild after a setback, our guide on how to grow your KiwiSaver walks through the contribution rate, fund choice and government contribution settings that make the most difference.
The default contribution rate for employees and employers rose from 3 percent to 3.5 percent on 1 April 2026, which lifts balances over time but also takes a little more out of take home pay now. Set against household budgets that are already stretched, that is part of the same squeeze showing up in the hardship queue.
Have you applied for a KiwiSaver hardship withdrawal, or been talked out of one and offered something else instead. Tell us how it went 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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