Despite a decline in the headline price inflation rate, a continued high level of withdrawals from KiwiSaver for financial hardship reasons suggests cost-of-living pressures are still being felt by some households.

The latest Consumers Price Index saw prices rise just 2.5%pa in the March 2025 quarter, down from a high of 7.3%pa in the June 2022 quarter. This is undeniably good news, particularly because it has allowed the Reserve Bank to reduce the Official Cash Rate to 3.25% from a recent high of 5.50%, enabling the banks to reduce mortgage rates bringing relief to many homeowners.

But prices continue to rise, albeit more slowly. The cumulative effect of the cost-of-living pressures we have all felt in recent years is that prices were 23% higher in the March 2025 quarter than they were five years ago in the March 2020 quarter.1 In those households for whom incomes have not kept pace with price rises, be that benefit-dependent households, or households with family members in lower paid employment, cost of living pressures are still very much present.

The purpose of KiwiSaver is long-term investing. It is designed to help Kiwis fund their retirement and buy their first home. However, it is possible to make withdrawals for financial hardship reasons. To make a KiwiSaver withdrawal for hardship reasons, applicants must show Inland Revenue evidence that they are facing significant financial hardship. Significant financial hardship includes when applicants:

• cannot meet minimum living expenses,
• cannot pay the mortgage on their home and their mortgage provider is seeking to enforce the mortgage,
• need to modify their home to meet the special needs or those of a dependent family member,
• need to pay for medical treatment for themselves or a dependent family member,
• have a serious illness,
• need to pay funeral costs of a dependent family member, or
• need to pay for palliative care for themselves or a dependant.2

Households experiencing any of the above can come under financial hardship at any time. However, the impacts of these kinds of circumstances are more likely to lead to financial hardship when they compound existing pressures such as rises in the cost of living, unsustainable debt, or a job loss. As such, looking at the total amount of KiwiSaver withdrawals for hardship reasons and the number of withdrawals for hardship reasons over time is useful both for examining the extent to which vulnerable households are currently under financial pressure, and as an indicator of future pressures because households that are withdrawing funds now will most likely have less money to purchase a house or retire on in the years to come.

Withdrawals from KiwiSaver for hardship reasons have grown rapidly in recent years and show no sign of slowing down.

• Over the year to June 2024, a total of $300.5m was withdrawn from KiwiSaver for hardship reasons.
• That’s a 188% rise from the year to June 2019 and a twelve-fold rise since the year to June 2012 (the earliest data available).
• A total of 32,480 withdrawals were made over the year to June 2024, 94% more than over the year to June 2019 and a more than four-fold increase compared with the year to June 2012.

The average amount being withdrawn has also increased.

• Over the year to June 2024, the average amount withdrawn was $9,252, a 66% increase compared with the year to June 2019. and a 152% increase compared with the year to June 2012.

As the price of everyday items rises, living expenses increase and people facing financial hardship need to withdraw more from KiwiSaver to meet these increases. Price rises accounted for around one-third of the increase in the average withdrawal between 2019 and 2024.

Withdrawals will also naturally increase as the number of KiwiSaver members increases. Between the year to June 2012 and the year to June 2024, the number of KiwiSaver members increased 71%. Chart 1 compares the growth in members with the growth in hardship withdrawal amounts and withdrawal numbers by indexing the three series.

The chart clearly shows that since 2016, withdrawals for have grown much faster than growth in member numbers, and the difference in growth rates has been particularly acute since 2023.

Monthly data is available from July 2024 to May 2025. Even with only 11 months’ of data the amount of KiwiSaver withdrawals for hardship reasons is 44% higher in the 11 months to May 2025 than the year to June 2024, and the number of withdrawals for hardship reasons is 52% higher. Looking at the monthly withdrawal totals in Chart 2, they vary month-to-month but there is no sign that they are starting to decrease. The monthly trend in the number of withdrawals looks very similar. Volatility likely reflects some seasonality, with public holidays affecting the number of business days available for KiwiSaver providers to process withdrawal requests.

Every region has seen an increase in the both the amount and number of KiwiSaver withdrawals for hardship reasons. Chart 3 shows the former. Between the years to June 2020 (the earliest regional data available) and 2024, the amount withdrawn rose 262% in Nelson Region, the highest of all 16 regions by some margin. Canterbury came in lowest at 98%. The national average growth was 140%. Unsurprisingly, Auckland was close to the national average on 162%. Aucklanders accounted for 44% of all withdrawn funds over the year to June 2024 so Auckland’s growth has a strong influence on the national average growth.

The number of withdrawals for hardship reasons also increased significantly across all regions, with ten out of the 16 regions seeing growth of 90% or more. Nelson was again highest on 160%, Canterbury was lowest on 52%.

Nelson’s growth was off a low base. Some $580,900 was withdrawn for hardship reasons by Nelsonians over the year to June 2020. Only the West Coast was lower. Nelson rose by $1.5m to reach $2.1m over the year to June 2024. In contrast, withdrawals by Aucklanders rose $81.8m from $50.5m over the year to June 2020 to $132.3m over the year to June 2024. Aucklanders accounted for 47% of the national growth in withdrawals over this period.

Looking ahead, we expect to see KiwiSaver withdrawals for hardship reasons begin to steadily decline now that price inflation has started to moderate. However, the decline might not happen for a while yet and when it does happen, we expect the decline to be gradual. As we reported in April we have concerns that price inflation will re-emerge this year with energy and food price rises being felt by households. When prices of essentials such as energy start to rise, everyone feels the pinch — vulnerable households most of all.

Also, vulnerable households are likely to be some of the last to benefit from economic recovery when it does begin, particularly those dependent on benefits or in lower-skilled, lower-paid work where job opportunities and wage growth are often the last to gather momentum during an economic upturn. Furthermore, we are still waiting for the recovery to begin in earnest, and when it does begin, we are expecting it to be a relatively weak recovery — all of which points to little relief for those struggling the most.