The way younger people are approaching KiwiSaver is shifting in the face of first-home withdrawals, according to two KiwiSaver providers.
In the past five years, KiwiSaver members have withdrawn almost $6.4 billion in first-home withdrawals.
Data from Inland Revenue – the central administrator of KiwiSaver – shows $6.4 billion was withdrawn by 204,570 members between June 2019 and June 2024.
This amounts to an average first-home withdrawal amount of $31,245 per member during that time. The average first home buyer withdrawing money from their KiwiSaver is 37 years old.
The KiwiSaver Act 2006 was amended in 2015 to allow first-home withdrawals for house-related purchase payments, such as deposits.
KiwiSaver, introduced in 2007, is a voluntary savings scheme to encourage retirement savings.
Members can choose to contribute 3%, 4%, 6%, 8%, or 10% of their before-tax pay and employers must also contribute a minimum of 3% to their employees’ KiwiSaver.
According to research firm Morningstar, KiwiSaver funds under management rose by $3.5 billion to $110.8 billion in the June 2024 quarter.
As of June 2024, there are currently 3,349,489 active KiwiSaver members. The number of active KiwiSaver members has risen by 60,000 since June 2023.
The largest KiwiSaver demographics are those aged 24–34, with 743,602 members, and those aged 35–44, with 702,348 members.
Younger people are looking at how they can maximise their KiwiSaver for first-home withdrawals, according to Kernel’s head of marketing and strategy Catherine Emerson.
“The conversation is really geared to how should I be investing my KiwiSaver in order to get to my first home deposit? As opposed to thinking from day dot, how am I investing or thinking about my KiwiSaver in order to use this for my retirement?”
The investing platform and KiwiSaver provider has been running its KiwiSaver scheme since 2022. Emerson said the average age of Kernel’s customer base is 38 and 36% of Kernel’s KiwiSaver withdrawals in 2024 so far have been for first-home deposits.
“It certainly feels like it's a scheme in people’s minds that has two distinct use cases. But the challenge with that is that as the property market has increased exponentially and wages haven't kept pace, the average age of home ownership [is] obviously getting kind of higher and higher, you then start pushing the period in which you think about KiwiSaver as a source of retirement funds to be later and later in life,” she said.
“And so [it’s] trying to find some kind of balance between, yeah, financially getting into your first home, but not also cutting yourself off at the legs in terms of your retirement savings for that longer term.”
John Berry, the co-founder of Pathfinder, a fund manager and KiwiSaver provider, said close to one in three people are taking KiwiSaver money out to buy a first-home.
He said the current amount of first time buyers withdrawing KiwiSaver money for first-home deposits isn’t undermining KiwiSaver because it’s only around 1% of members per year, according to the Retirement Commission.
“But over a long period, actually 1% a year, over 20 years adds up to 20% of people in KiwiSaver and actually becomes quite a bit more significant,” Berry said.
Pathfinder has been running its KiwiSaver scheme for five years, adding KiwiSaver to its fund management services back in 2019.
Using KiwiSaver as a first time home buyer means people in their twenties and thirties are spending a lot of time in conservative KiwiSaver funds, Berry said.
“They sit on a conservative fund, which is much more stable than a growth fund. But in a conservative fund, you miss out on the opportunity for high growth returns when markets are really rallying.”
He said first home buyers made up 20% of house purchases in 2015 – when people were allowed to take the money out of KiwiSaver for first home deposits – and that statistic is currently sitting at 26%.
“First time buyers are actually quite a significant part of the housing market in New Zealand.”
Based on the behavior that Pathfinder has seen from members over time, Berry said people who take their KiwiSaver out for a first time deposit are generally continuing to make their 3% contributions and taking the compulsory 3% from their employer.
There’s also a trend of changing their risk profiles from conservative to growth post first-home purchase.
“You want to be getting growth out of [your KiwiSaver] and it will be bumpier on the way through, but you won't get the same returns from a conservative fund as you will from a growth fund over an all time horizon,” he said.
New rules to KiwiSaver shouldn’t be added, he said, and there needed to be limits around the ability to withdraw because KiwiSaver was a retirement product and shouldn’t be seen as a cash account.
“When a country is building a superannuation product like KiwiSaver to provide dignity and retirement, essentially what you want is consistency and certainty around rules so you're not tinkering with rules too often.”
16 Comments
In my view, if you can show that you have sufficient means to support yourself in retirement, withdrawal from KiwiSaver should be allowed. Personally I wish I had never joined and see it merely as a money grab from the providers with all their fees. The money would be better applied to reduce the mortgage.
Allowing withdrawal of KiwiSaver funds (the individual's contributions, the employer's contributions, and the state subsidy) to buy a first home does two things: it undermines the purpose of KiwiSaver as a retirement fund, and it increases the competition for houses, and therefore their likely price.
The answer is to concentrate resources on the existing universal NZ Superannuation, by increasing its payout rate, and increasing state investment in the NZ Superannuation Fund.
I don't think it does either of those things. Firstly, owning a home mortgage-free before you retire is a stable base for retirement, eliminating what would otherwise amount to a retiree's biggest expense. So, owning a house is a sub-objective of financial stability in retirement. Secondly, I don't think it increases demand for housing. I started full-time work in 2015 and have always intended for my KiwiSaver to be used for my first home, and I did so last year. If that hadn't been possible, I would have just saved the same money in a different vehicle and my KiwiSaver balance would be roughly the same as where it is now. As stated in the article, I'm now following the pattern of still contributing at 6% + 6% employer match, and have now switched to a high growth fund. My wife followed the same strategy.
So on average, that puts you between 30 and 35. If you're 35, that probably means you went to tertiary, and most likely have $40k Student Loan also to pay off ( you both do?). And at 35, you probably have that 30 years mortgage noose around your household finance. On average, you won't pay that off before you retire. And...that assumes that you'stay put'. But the odds are you'll want to up-grade, and end up with even more mortgage Debt. And here's the Big One. The most expensive financial decision that many of us can make - choosing the wrong partner. +30% of first marriages/partnerships end up in failure. 2nd and successive attempts, even worse ratio.
And that's before the market risk of being "all in" on Growth Funds - but that's a whole other topic. That house you bought last year, for instance - on average the price decline since then have probably reduced your Kiwisaver Drawdown Deposit of equity of, say, 75k to $zero today. And, no. There is no cast iron guarantee that 'property always goes back up' to ensure that's retaken.
And at 35, you probably have that 30 years mortgage noose around your household finance. On average, you won't pay that off before you retire
I actually thought I read here recently that most mortgages get paid back before their term.
The most expensive financial decision that many of us can make - choosing the wrong partner
Some people are bad mama jamma, and this can take a while to work out.
But watching most of the relationship splits I've been around, the most common denominator is people stop doing stuff together/for each other.
"The average first home buyer withdrawing money from their KiwiSaver is 37 years old."
What a tragedy. 37, and getting higher.
50 years ago, how old was the FHBer? 23 in many cases, perhaps 25 on average. And not only was a home affordable using any metric we care to look at today, but most would have paid off their mortgage before today's average FHBer has even drawn down on their retirement savings, supposedly stored in Kiwisaver. Yes, society changes. But to load a lifetime's amount of Debt onto today's FHBers is a national disgrace. Do the maths. 37 drawdown age = 30 standard mortgage term = 67, after today's retirement age.
Will we fix that? We have to. Or have a look at your TV screens this evening and see how similarly disenfranchised citizens are reacting in Britain today ( NB: And, no. It has nothing to do with the play school deaths now. They were just the spark that ignited the flames of discontent, created over many decades now)
What a first class financial education we've given to our young, eh!
From mine above in another reply:
"That house you bought last year, for instance - on average the price decline since then have probably reduced your Kiwisaver Drawdown Deposit of equity of, say, 75k to $zero today. And, no. There is no cast iron guarantee that 'property always goes back up' to ensure that's retaken."
"The average first home buyer withdrawing money from their KiwiSaver is 37 years old."
What a tragedy. 37, and getting higher.
50 years ago, how old was the FHBer?
Not really a tragedy, society has changed. 50 years ago, the average age of a mother was 24. "Professional breeder" is not really that common a vocation anymore, there's 3-5 years of uni then another 5+ building a career. And just less people in general hooking up and going on to have children.
About the only way to reverse that trend is we get a lot poorer, and potentially depopulate the cities.
Allowing withdrawals from kiwisaver for FHBs to buy a house was really the most stupid "idea". What did they think would happen? Less for retirement and higher house prices (therefore higher withdrawals needed)... How can it be possible to so easily repurpose such an important scheme?
The problem that has caused higher house prices is lack of a capital gains tax. Boomers bought their houses for a dollar, and then bought investment properties in the multitude and kept going because it was all untaxed income. KiwiSaver provides an important mechanism for people to build a deposit so is definitely not to blame. What's clear is future generations are paying for past generations who got off with much lower taxes than they should have.
Allowing access to Kiwisaver for FHB's is just another means of dancing around an issue that no one wants to address.
Whether it's KiwiSaver, bank of Mum and Dad, siblings combining income and I have even heard of late 'friend groups' being encouraged to pool their resources to "Get on the property ladder" its all avoiding the cold hard reality that houses are simply over priced in NZ.
"KiwiSaver members have withdrawn almost $6.4 billion" which on a compounder basis over 30 years at a net 5% will be $27,660,000,000 of retirement savings that are denied to those who've used them today. Will property price have gone up enough to compensate for that? I guess today's lucky buyers will find out.
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