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KiwiSaver members are withdrawing from their funds in record numbers, but one financial services complaints resolution service is warning that some people don’t realise how difficult it can be.
RNZ reported last week that more than 10,000 more withdrawals were made from KiwiSaver for hardship reasons last year than in 2024.
Inland Revenue data shows there were 58,460 withdrawals for hardship reasons in 2025, 10,000 more than were made for a first home.
In total, $514.8 million was withdrawn from KiwiSaver because of hardship, and $2.1 billion for a first home.
Financial Services Complaints Ltd, an ombudsman service for financial services, said it dealt with a 41 percent increase in disputes in the first half of its reporting year.
Ombudsman Susan Taylor said KiwiSaver withdrawal rejections were the biggest contributing factor.
“We’ve seen a large increase in percentage terms. In the actual numbers it’s still relatively low but we would have seen in the last six months well in excess of several hundred people contacting us in the first instance if they are having difficulty having their withdrawal application processed or approved.”
She said sometimes it was because they had not yet provided the required information. “There is quite detailed information required. Sometimes it may be because they are unhappy if the application has been declined or perhaps they haven’t got as much money out from their KiwiSaver as they had been hoping for.”
Taylor said some people had unrealistic expectations of why they would be able to withdraw money early. “It’s there for substantial financial hardship, where people simply aren’t able to meet essential living costs. Sometimes people are wanting to withdraw money perhaps for more lifestyle purposes or not meeting that very high threshold of the substantial financial hardship.”
People were seeking help with their bills but unaware of how hard it could be to meet the hardship requirements of the KiwiSaver Act.
“People often don’t realise how strict the KiwiSaver rules are, leading to complaints about declined applications,” Taylor said. “We see people with ideas about using their KiwiSaver for longer-term financial relief.”
In one recent case, she said a woman wanted to withdraw KiwiSaver funds to buy a tiny home, rather than renting, but was only able to secure a smaller, short-term financial solution.
“We understand this is frustrating when you need financial security, but KiwiSaver savings are meant for your retirement,” she said. “You can’t access your funds before retirement, except for a few limited exceptions, and this is reflected in the act, rules and industry guidance.”
People who want to get their KiwiSaver savings out due to hardship reasons usually need to be in a situation where they cannot meet minimum living expenses, cannot pay the mortgage on their home, need to modify their home to meet special health needs or need to pay for medical treatment.
The decision about the withdrawal is made by the scheme’s supervisor.
David Callanan, general manager of corporate trustee services at one supervisor, Public Trust, said the two main reasons people would be turned down would be not supplying enough information and not meeting the required criteria.
“Members need to supply quite a bit of information, things like bank statements, proof of income, expenses, various documents to show that they are in genuine financial hardship.”
People might not meet the criteria when they had other sources of money available to them or they were not in a weekly budget deficit.
“If you apply to withdraw your KiwiSaver money because you’re not able to cover your living costs, the amount that you can withdraw is usually enough to get you back on your feet for 13 weeks. It isn’t your entire KiwiSaver balance so it’s already normal that there can be multiple applications from someone who’s had to come back.”
He said the “vast majority” of applications were approved.
Earlier, a woman who contacted RNZ said any suggestion accessing funds was easy was false.
“The process is invasive and onerous. You cannot apply, until you are effectively destitute – less than $3000 cash to your name.
“You must open your entire life to scrutiny, including providing the financial details of a partner. There is no guarantee that the hardship withdrawal will be approved, so as you watch your savings dry up, your stress levels ramp up, your mental health suffers and dark thoughts often crowd your mind.”
Taylor said the increase in complaints more generally reflected the wider economic challenges New Zealanders faced.
“We expect high dispute levels to persist as long as economic conditions remain difficult for many”. The rise also signals consumers’ growing awareness of dispute resolution services and their willingness to challenge financial providers and demand accountability.”
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