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In financially stressful times like these, our minds quickly run to those piles of money in KiwiSaver. It’s natural to think about tapping into your KiwiSaver under the significant financial hardship option.

Weigh all the options first

“I’m dealing with redundancy, I’ve got people depending on me, I’m just trying to meet personal expenses – that’s what hardship withdrawals are meant to be for, right?”

Well yes. 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 both:

  • Lock in your recent losses caused by COVID-19 disrupting the markets
  • 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.)

So it’s important to not run and do anything hasty. No fear-based, rushed decisions, please.

The response to the COVID-19 crisis includes all sorts of help you can look at before you need to apply for a hardship withdrawal. Use your support system first.

Get advice for your situation

Often there are alternatives out there we don’t even know about, but because our KiwiSaver fund is ours, we turn there first. But ideally you want to understand all the options and make a good choice.

The MoneyTalks helpline gives you access to expert 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.

Help from lenders and banks

Remember that banks and other financial service providers are willing to work with customers who are struggling financially. This could be by restructuring loans or giving access to short-term credit, for example. 

You have a legal right to ask for changes to your loan repayments when you are experiencing unforeseen hardship.

Government support

The government has announced a number of relief packages to help us through the COVID-19 crisis. Have a look to see if any can work for you:

If you’ve lost your job, can’t work at the moment or your income has fallen, 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 had an unexpected bill, they may be able to help you, even if you’re working.

Even if you don’t think you qualify, you can contact them to talk about your situation. Find more information about financial support from Work and Income or call 0800 779 997 (8am–1am, 7 days a week).

How big a deal is it to withdraw from KiwiSaver?

When you’re looking at how much to withdraw, you can run your numbers using our KiwiSaver savings calculator to see how it affects your long-term prospects. Enter your current balance, see what you’re on track to achieve, and then reduce your balance by the amount you want to withdraw. Your final figure will reduce significantly.

To give an idea, let’s say you’re 35 years old and have $22,000 in a KiwiSaver growth fund. If you withdrew $20,000 now, by age 65 you would end up having $74,000 less! That’s a lot to walk away from (even when you adjust for the effects of inflation over that 30 years at 2%, it would still be $41,000 less).

A word of caution

If you’re aiming to withdraw funds to give to someone else, particularly someone you’ve never met in person, make sure you’re not the target of a scam. A crisis like the one we’re in brings out the worst in some people, and there are frauds out there exploiting the effects of COVID-19. Keep your money safe!

How hardship applications work

You are generally able to withdraw your KiwiSaver savings if you are experiencing financial hardship. This means you are not able to pay your essential living expenses or your mortgage, suffer from serious illness, or have to pay for medical treatment. It can even be for funeral costs in some cases.

You generally can’t take out any government money that has gone into your KiwiSaver for hardship. You may only be able to take out a specific amount.

After you’ve pursued all your options, contact your KiwiSaver provider directly to apply (or if you’ve been in KiwiSaver for less than three months, contact Inland Revenue).

Tapping your KiwiSaver is a big decision and will shape your future in one way or another, so you want to be sure it’s a smart choice.

Comments (3)

Gravatar for kim Graham

kim Graham

4:15pm | 31 Mar 2020

Hi I'm Kim I just move to rotorua 5 weeks ago I meant to start work last week but we went in to lock down I'm low on my pay out on my last job n I've got few bills to pay as my partner is paying our broad where we stay but he off work too so I'm not getting money at all so yea pls help me out where I can get ohelp from pls

Gravatar for Julie Lassen

Julie Lassen

8:24pm | 29 Mar 2020

I need the Government to make it easy for us to withdraw our Kiwisaver for hardship.
I have credit card debt and not been able to clear it so it costs me $350 a month in interest and not clearing the debt at all. Now with no income it is impossible to get ahead. So it makes sense to clear the debt and then build up Kiwisaver again. This is extremely stressful,

Gravatar for Carnie Nelson

Carnie Nelson

7:51am | 29 Mar 2020

Can an employer and employee put Kiwisaver contributions on hold during Covid 19