KiwiSaver hardship withdrawals: can you get your money out early?

When can you withdraw money from KiwiSaver early?  

KiwiSaver’s there for long-term investing – to help you buy your first home (like the writer of this inspiring real-life read) or fund your retirement – but you may be able to withdraw your savings if you’re experiencing financial hardship.  

‘Significant financial hardship’ means you’re not able to pay your essential living expenses like food, rent or mortgage, power, medical treatment, the cost of modifying a home to meet special needs arising from a disability, or funeral costs in some cases. 

But hardship withdrawals are not for paying any of the following: 

• Credit card debt 
• Fines or infringement notices 
• Debt collection agency bills 
• Hire purchase debt for non-essential living expenses 
• Holidays 
• Travel to visit a sick relative. 

How much can you withdraw for hardship? 

As much as many of us might need one right now, it’s no money-spinner, guys. The amount you can withdraw is based on an assessment by your KiwiSaver provider’s independent supervisor, which is a separate company whose job it is to protect your KiwiSaver, such as Public Trust. They decide how much you’re approved to withdraw. 

The amount is usually limited to covering a shortfall in your living expenses for a few months, plus any overdue bills. You typically can’t withdraw any government money that has gone into your KiwiSaver, so you’ll only be able to take out money from your contributions, your employer’s contributions and your investment returns. 

Withdrawing your KiwiSaver has long-term effects 

“I’m dealing with redundancy, I’ve got people depending on me, I’m just trying to meet my personal expenses – isn’t that what hardship withdrawals are meant to be for?” 

Definitely, but you want to make sure you exhaust all your other options first. It needs to be a last resort. 

Withdrawing now is a big deal, because you miss out on the money that would be yours if you stayed in KiwiSaver. Tens of thousands of dollars could be at stake. (See below.) 

It’s super important not to do anything hasty. No rushed, fear-based decisions, okay? 

Consider these options first 

There’s all sorts of help you can ask for before you apply for a hardship withdrawal.  

1. Everyone needs backup sometimes, so if you can, lean on your own support system (such as whānau) first.  
2. Get free, expert support. The MoneyTalks helpline gives you access to financial mentors via live chat, phone, email or text: moneytalks.co.nz, 0800 345 123, help@moneytalks.co.nz or text 4029. You can even speak with them anonymously, if you like. 
3. The government has a number of relief systems in place to help people through a crisis. If you’ve lost your job, can’t work at the moment or your income has decreased, you may be able to get a benefit or some other financial help from Work and Income. 
   If you’re struggling to meet living costs or have received an unexpected bill, Work and Income may be able to help you, even if you’re working. Support options include: Temporary Additional Support (if your weekly costs exceed your income), a food grant (for immediate grocery needs) and advance payment of benefit (if you’re eligible for ongoing support). Visit the website or call 0800 559 009. 
4. Another option is fair, free-free, no-interest or low-interest loans. These are a great alternative to high-interest payday loans, for instance. Good Loans is run by Good Shepherd, and these types of loans can be used for bills and debt to get through, and by migrant workers as well. 
5. Your bank or mortgage lender will want to help. Ask about access to short-term credit, or a payment holiday. You have a legal right to ask for changes to your loan repayments when you’re experiencing unforeseen hardship. Banks also have legal obligations to consider hardship requests under the Credit Contracts and Consumer Finance Act (CCCFA).  
6. Consider a savings suspension. You can apply to pause your KiwiSaver contributions for three to 12 months to free up money in the short term. There’s more on this below. 
7. Consider a temporary contribution rate reduction. This will keep or lower your KiwiSaver contribution rate to 3% for 3 to 12 months. There’s more on this below. 
8. If debt is dragging you down, we’ve got some info on how to raise yourself up step by step here. 

Savings suspensions and temporary contribution rate reductions 

Unlike a KiwiSaver hardship withdrawal, to take a break from paying KiwiSaver contributions, you don’t have to go through a full hardship application process. In fact, you don’t even have to give a reason! You can take as many savings suspensions are you like, and take them back to back. 

It sounds too good to be true, but here’s the catch. While you’re on a suspension, both your own contributions and your employer’s contributions pause, and you won’t receive the annual government contribution. Still, it’s better than a hardship withdrawal. 

If you’ve been a KiwiSaver member for 12 months more, a savings suspension lets you temporarily stop making KiwiSaver contributions from your pay for up to a year. Stopping your contributions means you’ll have more money in your take-home pay to use to help you get through. Your existing KiwiSaver balance stays invested, and you can pick up where you left off when your situation improves. IRD explains how to apply. 

A temporary contribution rate reduction is an alternative to a savings suspension that lets you lower your KiwiSaver contribution rate to 3% for up to a year. That way, you don’t stop entirely, but you’ll have a bit more money in your pocket each payday. You can revert back to your current contribution rate at any time. IRD explains more, while our free KiwiSaver calculator lets you see how a rate reduction would affect your overall retirement savings.

What a hardship withdrawal costs long-term 

Withdrawing your KiwiSaver early reduces the amount of money you’ll have saved through KiwiSaver by the time you retire. Because your investment grows over time through the not-so-secret money-making sauce of compounding interest, the difference in your balance won’t just be the amount you take out, but all the growth your money would have experienced over time. 

Here’s an example. A 35-year-old with $22,000 in a KiwiSaver growth fund who withdraws $20,000 would have $74,000 less by retirement at 65 in future dollars. In today’s purchasing power – adjusting for 2% annual inflation over 30 years – that’s still $41,000 less. 

Both figures show the same real cost – one in future dollars, one in today’s money. Either way, it’s significant. 

That’s why a hardship withdrawal should be a last resort – not a first option. Our KiwiSaver calculator lets you model the exact impact on your own balance. Enter your current amount, then reduce it by what you’d withdraw, and see the difference. 

And the stakes are real: 30% of Kiwis under 65 don’t believe they’re going to have a financially comfortable retirement. For those aged 55–64, that rises to 40%. A hardship withdrawal now makes that picture harder to change. 

How to apply for a KiwiSaver hardship withdrawal 

For zero regrets, remember: a KiwiSaver hardship withdrawal should only be considered if you’re having a total mare and it’s your only option. Follow steps one to eight above to exhaust all other possibilities; you’ll need to show you’ve tried other avenues as part of your application anyway. Only then: 

KiwiSaver hardship withdrawal FAQs

Can I use my KiwiSaver hardship withdrawal to pay off debt?  

No, sorry. KiwiSaver is designed for two things: buying a first home and growing a nest egg for retirement. When times get tough, you can withdraw for essentials like keeping food on the table and paying your living expenses, but typically, it’s not for repaying debt like credit cards, fines or infringement notices, debt collection agency bills or hire purchase debt for non-essential living expenses. If debt is your main issue, we can help you tackle it. Talking to a trained financial mentor free through MoneyTalks (0800 345 123, seven days a week) could also be a really smart (and comforting) move. 

Do I pay tax on a KiwiSaver hardship withdrawal?  

No. When you take out your KiwiSaver money, either for financial hardship, a first home or to use to live on in retirement, that money is tax-free. That’s because your KiwiSaver contributions are made after your income has already been taxed, and the gains from your investments that you own in KiwiSaver are taxed as well, so when you withdraw in this instance, there is no tax to pay. It’s your money to use.   

What happens if my hardship application is declined? 

If your application is declined, your provider’s independent supervisor will explain why. Common reasons include not meeting the eligibility criteria, not providing enough supporting documents, or having a money left over in your budget to cover essential expenses. You can reapply or ask your provider to review the decision. Kōrero to MoneyTalks about your options. 

How soon can I apply again after a hardship withdrawal? 

If your withdrawal was to cover living expenses, it was probably calculated to cover you for a three-month period, so in most cases you’ll need to wait at least that long before you apply again. If your situation changes significantly within that time, get in touch with your KiwiSaver provider.