Financial mentors across New Zealand now devote 40 percent of their time to KiwiSaver hardship withdrawal applications. The FinCap Voices Report 2026 found that one in eight clients now seeks early access to retirement savings for essentials.
The FinCap Voices Report 2026 attributes this workload to sustained cost-of-living pressure: stagnant wages and rising fixed costs — food, electricity, rent and insurance — are driving the trend, with the majority of financial mentoring clients now relying on benefits as their only form of income.
The scale of the shift is stark. According to FinCap, the nationwide amount withdrawn from KiwiSaver due to hardship has increased by 1,046 percent since 2015.
Withdrawal Volumes Surge
The Financial Markets Authority recorded 44,099 hardship withdrawals worth $443.6 million in the year to 31 March 2025. The average withdrawal reached $10,058. Applications rose 50.8 percent and total value increased $179.3 million from the prior year.
IRD data showed 58,460 hardship withdrawals totalling $514.8 million for calendar 2025. Combined hardship and first-home withdrawals hit $243 million in May 2026 alone.
Hardship levels now stand approximately three times pre-pandemic norms, according to FinCap.
Wage Growth Lags Inflation
Annual CPI inflation reached 4.1 percent for the June 2026 year. The Labour Cost Index showed salary and wage rates rising only 2.0 percent in the December 2025 quarter. Treasury forecasts unemployment peaking near 5.5 percent.
Benefit recipients now form the majority of financial mentoring clients. Median client budgets show a $107 weekly deficit per $100 of income.
Scheme Rules and Bank Role
KiwiSaver providers including ANZ, ASB, BNZ, Westpac and Kiwibank must approve applications under strict FMA and IRD rules. Withdrawals are limited to member and employer contributions plus returns. Government contributions and the original kick-start remain protected.
Applicants require statutory declarations, proof of inability to meet minimum living expenses and supervisor approval.
Long-Term Erosion
Repeated early access reduces compound growth for affected members. Total KiwiSaver assets reached $123.1 billion at 31 March 2025, yet the 1.3 percent of members who withdrew hardship funds traded future security for immediate needs.
FinCap identifies a projected $30.5 million annual funding gap for mentoring services. The peak body recommends a $5.5 million increase in government funding alongside levies and voluntary contributions of up to $25 million from KiwiSaver providers, banks, lenders, electricity providers and telecommunications companies.
Without sustainable support, demand may overwhelm the sector into 2027.
"I'm aware of the increase in hardship withdrawal applications. It is positive that people are seeking financial advice, but we need to ensure all other options have been considered before KiwiSaver funds are drawn from." — Commerce and Consumer Affairs Minister Scott Simpson (RNZ)
Minister Simpson has confirmed the government is not considering a levy on financial services providers to fund the mentoring sector. The pattern raises questions about scheme design and the balance between short-term relief and retirement adequacy.
