Early KiwiSaver withdrawals reached a new all-time high in July with over $191 million taken out in financial hardship and home ownership withdrawals.
People are generally only able to withdraw from their KiwiSaver when they reach the age of 65 – New Zealand’s current retirement age. However, people can apply for early KiwiSaver withdrawals on financial hardship and first home ownership grounds.
The last time early KiwiSaver withdrawals reached an all-time monthly high was in May 2024 when over $182 million was withdrawn.
According to Inland Revenue (IRD), which tracks monthly KiwiSaver statistics, 7,990 KiwiSaver members withdrew $191.3 million during the month of July.
It’s 21.7% or $34.2 million more than what was taken out in total early KiwiSaver withdrawals during the previous month of June, and 68.4% or $77.7 million more when compared to July 2023.
During July 3,840 people withdrew $155.4 million for home ownership, and 4,160 people withdrew $35.9 million because of financial hardship.
Home ownership withdrawals in July jumped $25.9 million compared to June and financial hardship withdrawals were up $8.2 million in the same period.
On a yearly basis, July’s first home withdrawals rose $59.4 million compared to July 2023 while financial hardship withdrawals climbed $18.3 million.
The latest IRD data shows KiwiSaver fund managers received $1.87 billion in July, with the Government’s KiwiSaver contributions contributing over $1.01 billion.
The Government contributes 50 cents for every dollar a person contributes to their KiwiSaver, up to a maximum Government contribution of $521.43.
To get the full Government contribution, people need to have contributed at least $1042.86 to their KiwiSaver between the 1st of July and 30th of June each year.
As of July 2024, there were 3.3 million members enrolled in KiwiSaver with 4,299 new members joining that month.
By KiwiSaver scheme entry method, 659,598 members were in default allocated schemes, 214,083 were in employer nominated schemes and 2,480,352 had actively chosen their KiwiSaver scheme.
Across the age bands, the 25-34 category currently has the largest number of members with 743,576, followed by the 35-44 category which now has 705,371 members.
The number of non-active members – which Inland Revenue tracks through those who opt out of the scheme as well as those who close their accounts – came to 751,370 in July which is 5,001 more than in June.
Even though KiwiSaver withdrawal figures are rising, they still only make up a small amount of the overall funds currently in KiwiSaver.
Equity research firm Morningstar said in July that total KiwiSaver funds under management (FUM) rose from $108.6 billion in the March quarter to $110.8 billion in the June 2024 quarter.
ANZ still has the biggest slice of the market share pie with 18.7%, or $20.7 billion, and Fisher Funds is in second place with a 15.4% market share and nearly $16.7 billion in FUM.
Fisher Funds and ASB placed second and third in the June quarter with a market share each of 15.1% or $16.7 billion, although Morningstar's analysis found Fisher Funds had managed to squeeze ahead into the second biggest provider spot.
11 Comments
The more that's withdrawn, either by entitlement (qualifying age) or hardship, the less goes into The Fund(s). As that happens, the more underlying assets have to be sold to meet the redemption. That is going to happen here, there and everywhere as the population ages.
"The number of non-active members – which Inland Revenue tracks through those who opt out of the scheme as well as those who close their accounts – came to 751,370 in June which is 5,001 more than in June."
Sounds right. But at some stage (soon?) it's going to have an impact. And the worst impact? Kiwisavers withdraw their lump sum at 65, and they don't spend it on a new car or reinvest it, they retire the outstanding Debt they have. "Nearly 1 in 5 New Zealand retirees still manage a mortgage into retirement"
" Decumulation refers to the process of drawing down savings that have been accumulated over the working life to provide income in retirement. Since the inception of KiwiSaver in 2007, regulators, policymakers and providers have focused on the accumulation phase of saving in KiwiSaver. However, KiwiSaver has now been in existence for more than 17 years, and it is expected that individuals approaching retirement are now doing so with larger sums of money accumulated in KiwiSaver. We see the focus is switching to decumulation and what this means from a product and policy perspective."
The vast majority of early withdrawals was to buy a first home. Nothing wrong with that; those people are converting an asset into another asset. Sure; the choice doesn't have such great yields, but that's a conscious choice. The Hardships trend isn't good, but sums involved are tiny
I have a few mortgages; I may still have some when I retire, but they're a very small fraction of my property portfolio. The average of the early withdrawals in July was around $24,000; that's a tiny fraction of my Kiwisaver, not to mention other savings.
Actually the withdrawals for hardship overtake those for first home withdrawal, normally those people have lost all their savings & near lost their house as well. Look at the numbers of people, not at the wealth or $ withdrawn. Sure the wealthy have more to withdrawal and they use the system for asset purchases, but the poor well they never had much and what little they had during hardship is reduced to nothing as they have fewer social supports they can fall back on (no cushion of wealthy family to pay their bills or give them free housing temporarily, they face the real threat of death if they do not succeed in the withdrawal).
What we see is the usual long tail after any mass disabling event where people burn through all savings, assets, options and finally in desperation end up with nothing as you cannot just magic medical care, and income support out of thin air and income support is denied to much of the population under 65, (predominantly by biases from old stereotypes of gender & disability/birth affecting policies and inclusion into support schemes). Try paying a mortgage on no income or a benefit and see how long it takes you to wind up homeless or in emergency housing. Sure you will have a few years if lucky you might survive without income support then a collapse of any relationships, informal support (food banks support while good has a limit often & cannot pay your power & housing etc) and that is what we see in data. Most people affected not making it to the marker of a few years and cashing up everything they have.
You say that as if they had a choice. In many places & positions once in kiwisaver they had no choice to get out and really many did not choose to go into it in the first place (with that decision often being done by parents or an employer to start and poor informed consent). Lets not kid each other there was no alternative option they could put forward either. They could not present their existing managed funds or other retirement plans and get the money that would have gone into kiwisaver from employers and govt paid into that. It is purely a govt subsidy to fund managers that benefits the operators & large benefactors of the schemes more then those in the middle using it and for those at the bottom they never were able to enter kiwisaver in the first place and don't even have enough income for food, essential medication and power let alone money to save.
Kiwisaver is not even a good version of an investment plan. It is a managed fund like many other managed funds with less consumer protections & reporting and even poorer controls. If anything the fact they forced many people into accounts with the Ausi banks primarily was very telling. It also heavily discriminated against those with life limiting conditions from birth who would be dead 20-40 years before the fund would release their money back to them. But then I guess everyone could use flowers on their graves, and bonus cruises to their fund managers.
The fact ANZ were able to defraud 50,000 people of the govt subsidy funds and most of those customers could not tell till years later due to the lack of clear reporting in statements and the poor standards of records was considered a small issue out of the many big issues with kiwisaver. That is not an investment, nor savings. That is just a slap on the back to boys club mates who could really use thousands more customers being forced to pick up the existing managed fund but make it cheaper to operate with more cuts returned as profit. With our property market did they really need that business? Weren't they making enough profits already?
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