People are being allowed to raid their KiwiSaver accounts too easily, one debt specialist says.

Christine Higgins, of hardship and debt solutions charity DebtFix, said even when she recommended other solutions to people who were considering a KiwiSaver withdrawal, they would not want to pursue them.

“They will say ‘that sounds nice, I’ll try that later but can you give me my money now? And we cannot stop them’.”

The Financial Markets Authority’s KiwiSaver Annual Report 2025 shows financial hardship withdrawals increased sharply in 2025, up 50.8 percent to 44,099.

There was a total of $443.6 million withdrawn, up $179.3 million from the previous year.

Higgins said the increase had coincided with a drop in people opting for no asset procedures, which is an alternative to bankruptcy for people with no realisable assets or ability to repay their debt. It only lasts 12 months.

In the 2016/17 year, there were 1349 of these. A year earlier, it was 1563.

But in the 2024/25 year, there were only 405. Higgins said this could sometimes be a better solution for people in a tricky situation than taking money out of KiwiSaver, which would leave them less to retire on.

Sorted estimated a $8000 hardship withdrawal would cost someone about $50,000 off their final retirement balance over a 30-year investing time horizon.

Applications for withdrawals have to go to a scheme’s supervisor for approval but Higgins said they seemed to be signed off because they were something that could be dealt with immediately.

“One of the criteria is that you’ve exhausted all other options. So if someone like us says you’ve got other options, I think they should be exhausted before we say, we’ll put your KiwiSaver through, but also you’ve got supervisors and providers not wanting a complaint made against them because it’s just, ‘give them the money and then it helps them out of this hole they’re in’… there is a lot of hardship out there and people are quick to make a complaint if they don’t get the money out when they think they should. And that’s back to them using it like a savings account, so it’s really hard.”

She said complaints from people that they should be able to access their money to help them in a difficult situation did not reflect the purpose of the scheme.

“They are using it exactly like that – ‘it’s my money, give it to me’, but it’s not a savings account. And actually, it’s your money when you’re 65, you know?

“The problem is that the government is going to end up paying for these people down the line if we don’t fix this leaky tap right now.”

David Callanan, Public Trust’s General Manager Corporate Trustee Services, said people were expected to have explored and exhausted all other options before they applied for a withdrawal.

“The vast majority of the cases we’re seeing are for people in genuine need. The information in their applications backs that up – they are struggling to pay their living expenses for essential things like groceries, power bills, rent and transport.

“KiwiSaver providers and supervisers are continually enhancing their processes to ensure consistency and to weed out questionable applications.

“For those rare few who are doing the wrong thing, they are only disadvantaging themselves in the long run. Taking money out is borrowing from your future self, losing the benefit of the long term investment return, and the security you could have in your financial wellbeing at retirement. It might compromise your ability to withdraw in the future as we go back and check previous requests.”

He said the FMA’s report figures showed the real-life impact economic volatility, living costs and job market uncertainty had on individuals and families.

“As supervisers, we remain committed to ensuring the integrity of the withdrawal process while supporting providers to guide members through difficult times.

‘As the superviser for multiple KiwiSaver schemes, Public Trust plays a hands-on role in reviewing and approving financial hardship applications. This gives us a direct view into the financial pressures many New Zealanders are currently facing.”

Koura Wealth founder Rupert Carlyon said providers received repeat applications for the same issues.

“People use the money for something else, rather than what they tell us they will use it for,” he said. “There is not much we can do about it though.”

“If they can show that they are still suffering hardship, we will process a new application. The only thing we can do is pay down debts directly, if they withdraw for an outstanding debt, but if they are claiming for living expenses, we don’t have many options.”