Increasing KiwiSaver Withdrawals and Suspensions – What Should You Do?

Increasing KiwiSaver Withdrawals and Suspensions

What is KiwiSaver?

KiwiSaver has been a reliable friend on the journey to a comfy retirement for a while now. It's not your typical savings program; it's more like a team effort involving the government, your employer, and you.

What are the Benefits of KiwiSaver?

The New Zealand government wants to encourage everyone to join in on the KiwiSaver fun. So, they made it mandatory for employers to pitch in 3% of your salary. Plus, they're super generous and match your contributions with 50 cents for every dollar you put in, up to a yearly limit of $521.

Increasing KiwiSaver Withdrawals

Despite the strong support in place, KiwiSaver members typically have few chances to make withdrawals. These are mainly allowed in specific situations, like when facing financial hardship. However, the latest report from the Financial Market Authority (FMA) on KiwiSaver shows a notable increase in hardship withdrawals and paused savings compared to last year. This trend raises concerns about household financial stability and forces us to ponder how it might affect individual retirement savings.

What are the criteria?

The ongoing cost of living crisis is causing financial hardship for many KiwiSaver participants. To qualify for financial hardship under Inland Revenue Department (IRD) guidelines, one must struggle to meet basic living costs, face the risk of losing their home to foreclosure, require home modifications, deal with a serious illness, or cover funeral expenses for a dependent family member.

Why Does Early KiwiSaver Withdrawal Matter?

Unfortunately, more people are resorting to KiwiSaver withdrawals due to financial hardship this year. These withdrawals can seriously impact retirement savings by forfeiting future capital gains and compounded returns.

While it is understood that unexpected situations may force such decisions, a cautious approach is strongly advised. Exploring alternative options before making withdrawals is highly recommended.

Increasing KiwiSaver Suspensions

Amid the rise in KiwiSaver withdrawals, there's also been an increase in KiwiSaver suspensions. Both actions pose a risk to long-term retirement savings. KiwiSaver suspensions allow individuals to temporarily stop their regular contributions. However, during this suspension, no contributions come from employers or the government, potentially affecting long-term savings.

What Are the Reasons Behind the Surge?

The recent FMA KiwiSaver Report shows a significant 37% increase in withdrawals due to financial hardship, totalling $145 million. This echoes the economic uncertainty seen during the Covid-19 pandemic in 2020 and 2021. Regulators attribute the surge in suspensions and withdrawals to ongoing economic challenges from COVID-19 and cyclone events in the upper North Island.

It's important to note that while the percentage increase appears substantial, those using hardship withdrawals are just a fraction of the 3.5 million KiwiSaver members. Moreover, their actions are unlikely to significantly impact the performance of your KiwiSaver fund.


The increasing prevalence of KiwiSaver withdrawals and suspensions is a significant development deserving our attention. KiwiSaver continues to be a strong and dependable retirement planning option for millions of New Zealanders.

Seeking Financial Guidance for KiwiSaver?

Facing financial challenges? Explore KiwiSaver options and consult experts!

To take control of your financial future, we suggest you take 10 minutes of your time and take the simple KiwiSaver HealthCheck, it’s FREE and the team at National Capital will let you know if your current KiwiSaver fund could actually be performing better for you, including if changing to a different fund and provider would be the next best action to take



Monday, 9 October 2023