New report exploring alternatives to KiwiSaver hardship withdrawals released

Following the sharp rise in hardship withdrawals from KiwiSaver in recent years, a new report looks at options to help people in financial hardship to avoid withdrawals from their savings in KiwiSaver.

The report, Sacrificing tomorrow to survive today: looking at options to assist KiwiSaver members to keep their savings intact in times of hardship, is the result of research led by senior lecturer in Law at Te Herenga Waka - Victoria University of Wellington, Victoria Stace.

Financial mentors across the motu have expressed concern at the number of people applying for KiwiSaver hardship withdrawals with one in eight closed client cases sought to withdraw KiwiSaver funds early. 

In its 2025 Review of Retirement Income Policies, Te Ara Ahunga Ora | Retirement Commission stated that: "In the year to June 2025, just over 45,000 people had access their KiwiSaver funds early due to financial hardship, compared to 18,000 five years ago." 

There are also a range of 2026 election proposals to adjust contributions to KiwiSaver. Taken together, these lead FinCap to conclude action is needed as soon as possible to ensure that settings surrounding hardship withdrawals are the best they can be. This includes work towards adequate resourcing and co-ordination of support for people considering withdrawal. 

A key finding in the research is that hardship withdrawals could be reduced if expert assistance is available to explore other options to meet people's financial needs. 

With 40% of their time currently being consumed by KiwiSaver hardship withdrawal applications, financial mentors are clear that hardship withdrawals can be reduced if they have the opportunity to work with applicants and explore other options to meet people's financial needs.

Alternatives to KiwiSaver withdrawal can include restructuring a person's debt to make repayments manageable, negotiating with lenders to reduce repayments on a loan for a period of time, or navigating available support from government agencies and local charities.

The research also found that there was general support for the concept of sidecar savings in the KiwiSaver scheme where members can direct some contributions to a separate account that is accessible in case of hardship or emergency. 

The report contains recommendations for further research and ensuring  KiwiSaver members wanting to withdraw their savings due to hardship have access to expert assistance. FinCap notes our calls for increased and ongoing funding so that experienced financial mentors continue to be available when and where people need their support.

The recommendations of the report offer next steps for ensuring KiwiSaver settings are robust and suitable when members face financial difficulty.