KiwiSaver and Financial Hardship - All you need to know

06 July 2020

Times are getting tough, economically. The wage subsidy has helped stave off the grim reaper of a full-blown recession, but there are already thousands of New Zealanders buckling under incredible financial pressure. 


So if you’re like one of the thousands of new unemployed New Zealanders, or have come across some unforeseen economic difficulty, you may be eyeing up your KiwiSaver fund goldmine as a potential saving grace. Pulling from your KiwiSaver account, when it’s not for a first home or your retirement, comes under the Significant Financial Hardship claim —  something you may need to lean on to get back on your feet. 

The first step is understanding whether you qualify for this extreme stopgap, and second is completely understanding the real-life consequences of making a Significant Financial Hardship claim. You only need to meet one of the following criteria to start subtracting money: 

  • cannot meet minimum living expenses;
  • cannot pay the mortgage on the home you live in, and your mortgage provider is enforcing the mortgage;
  • need to modify your home to meet your special needs or those of a dependent family member;
  • need to pay for medical treatment for yourself or a dependent family member
  • have a serious illness; or
  • need to pay funeral costs of a dependent family member

To get the money, you will need to provide evidence to back up your claim and have had a KiwiSaver account for longer than two months. You will only be able to withdraw your employer and employee contributions and investment profits – you will need to leave the Government Contribution in your account for your retirement.

Each KiwiSaver provider has a slightly different process for application. At kōura, we require our members to fill out a form which we pass onto our Supervisor (Public Trust) who assesses the claim. 


The consequences of taking this money prematurely.

Taking money out of your KiwiSaver fund today will inevitably lead to a lower KiwiSaver balance in the future – which means less money for your retirement – and a lower quality of life in retirement. In saying that though, retirement planning shouldn’t come at the cost of your survival, it’s not worth subjecting yourself to poverty conditions or giving up your house just to honour a commitment to your future self — you’ll need to weigh this up. 

Although it may seem you are only taking out a small portion of your fund (e.g. $10,000) this amount will equate to a much larger amount over your working life. Because invested money earns extra dollars on top (the effect of compounding interest), by withdrawing early, you’re losing this additional revenue stream.  This means that if you take out $10,000 at the age of 35, you’ll have $36,000 less1 by the time you retire if it’s not quickly replaced.  That’s $18 less per week in retirement.


Could it be worth getting a loan instead?

If you have the option in your mortgage to draw from the equity against your house, this could be a particularly good option at the moment with low-interest rates being offered by banks. If you were to borrow $10,000 extra on your mortgage, the total amount would be $24,2732 over a lifetime (that is $14,2732 in interest). On the other hand, if you withdrew $10,000 from you KiwiSaver you would miss out on over $36,0002 in returns. The opportunity cost of withdrawing from your KiwiSaver instead of borrowing from your bank could be a difference over $22,0002

What would happen to your final KiwiSaver retirement balance if you withdrew $10,000 at age 353?

 Total Account Balance at Retirement

Weekly Income During Retirement



  1. KiwiSaver account modelled on a kōura glide path which assumes a $55,000 p.a. salary at age 25 that incrementally increases until $210,395 p.a. at age 64 and a consistent 3% employer and employee contribution rate
  2. Loan of principal amount $10,000 at 3.00% p.a. from ages 35 to 64 compared to a KiwiSaver account modelled on a kōura glide path which assumes a $55,000 p.a. salary at age 25 that incrementally increases until $210,395 p.a. at age 64 and a 3% contribution rate
  3. Assumed retirement balance provides weekly income for 25 years


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