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Thinking of making a KiwiSaver hardship withdrawal? Here’s what you need to know

Page last updated: 24 August 2021

If you’ve lost income due to COVID-19 you’ll understandably be feeling financially stressed. You may be considering a KiwiSaver significant financial hardship withdrawal as a short term solution. The trouble is, this kind of short term relief can have an irreversible long-term impact on your retirement fund. Gillian Boyes, Manager of Investor Capability at the Financial Markets Authority has rounded up the key things you need to know.

You could be raiding your future
It’s important to realise withdrawing money reduces your future savings by much more than the amount you withdraw. You will not only crystallise the losses your fund has suffered since the effects of COVID-19 began, but also lose out on future returns.

For example, a 35-year-old earning $80,000 who has contributed 3% to a KiwiSaver balanced fund since KiwiSaver started 13 years ago could have a fund now worth $100,000. If they withdrew $30,000 now, they could have $47,000 less by the time they turn 65.

Getting a KiwiSaver hardship withdrawal is a process
The rules around KiwiSaver hardship applications are deliberately strict, to discourage members from missing out on future benefits. So don’t get annoyed with your provider for the time it takes to process an application – they’re following the rules.

Applying for a KiwiSaver hardship withdrawal requires completing a statutory declaration about your assets and liabilities, as well as showing you have explored other options for funding. You also have to meet the definition of ‘hardship’.

Hardship is defined as not being able to meet your living expenses and rent or mortgage payments. Serious illness or medical expenses can also qualify as serious hardship.

Explore other options first
Before considering dipping into your KiwiSaver, it makes sense to explore the range of financial support measures the Government has put in place. These are detailed on the Covid-19 website, and include wage subsidies, help with urgent costs such as food, rent or bills, and possible relief on mortgage or other debt repayments. You can call the government helpline on 0800 779 997 (8am–1am, 7 days a week) to find out what help is available. You may also be eligible for support from Work and Income, even if you’re working.

Get some expert advice
You’re not alone. There are experts trained to help people in your situation – and the support is free.

What about my debts?
You might be in a situation where you could better manage your household costs if you didn’t have regular debt repayments, like credit cards, store cards or personal loans.

Banks and other financial service providers are willing to work with customers who are struggling financially. Borrowers have a legal right to ask for changes to their repayments when they are experiencing unforeseen hardship.

Consider talking to a budgeting advisor who may be able to liaise with lenders on your behalf and secure more favourable payment terms for you. Face-to-face services aren’t available right now, but Money Talks can hook you up with someone to help over the phone or online.

Look after yourself 
Financial stress can take a toll on your mental health, and it’s important to keep looking after yourself. The Mental Health Foundation has put together a list of top tips to get through, including things like switching off the news, finding ways to connect and keeping active. You can also free call or text 1737 at any time to speak with a trained counsellor – it’s free and confidential. 

Still want to go ahead?
If you’ve decided that you want to proceed with a KiwiSaver significant financial hardship application, you’ll need to contact your KiwiSaver provider to apply. Don’t know who your provider is? You can check through the MyIR service at ird.govt.nz.

Finally - don’t get scammed
Scammers are active and trying to take advantage of the COVID-19 situation. Be careful if you’re intending to use your KiwiSaver money to give to someone else, especially someone you’ve never met in person – you may be the target of a scam or fraud.

More information:

visit the IRD website

Read the transcript from FMA CEO talking to Radio New Zealand about 'Hardship withdrawals a last resort'.