A man told his role might be disestablished tried to withdraw $8000 and was rejected. A divorce case required a court order before funds could be released. FSCL cases illustrate how strict the withdrawal rules actually are.
Financial Services Complaints Ltd has published details of four recent KiwiSaver withdrawal cases that illustrate just how narrowly the rules are drawn — and how often that catches people by surprise.
In one case, a man applied to withdraw $8000 because he had been told his role might be disestablished. His provider declined. The supervisor ruled he had not yet met the hardship threshold — it was not clear he would be in hardship in future either. FSCL, reviewing the case, agreed the test had not been met.
In another, a man wanted to use his KiwiSaver to pay out his ex-wife's share of the family home. The provider refused because he had no court order and no formal relationship property agreement. When he obtained the documents and the money was released, he complained about the $8000 in legal fees he had incurred. FSCL told him the paperwork was legally required and his complaint was not upheld.
A third case involved a woman who wanted to withdraw money to purchase a tiny home, which she said would help stabilise her living situation and improve her finances. The supervisor rejected the application. FSCL found the decision reasonable.
The fourth case — involving a woman left waiting for a withdrawal that took too long, causing her to fall behind on rent — resulted in the provider being ordered to pay $500 in compensation. That case was reported separately by RNZ earlier this month.
Why the confusion persists
Pie Funds chief executive Ana-Marie Lockyer said misconceptions about the withdrawal process were common. "Many people assume that being in financial hardship automatically means they can access their KiwiSaver savings, but the rules are intentionally strict and withdrawals are only approved in limited circumstances." She said the cases highlighted the importance of understanding eligibility criteria and evidence requirements before applying.
Generate investment specialist Greg Smith said people often assumed it was the provider making the decision — but the actual decision rested with the scheme supervisor, a separate entity. "There's a very strict set of guidelines about withdrawals. And they have to meet pretty strict criteria. It's not the provider saying no." Smith said the hardship test required people to genuinely not be able to meet their outgoings. "I think people just think sometimes, is it just something I can draw on because I need some extra money to pay for petrol?"
He also noted that the ability to access KiwiSaver savings for a first home was relatively unusual by international standards.
The volume of hardship withdrawals has also contributed to the sense that the tap is open. On an annual basis, hardship withdrawals surpassed first-home purchases for the first time in the year to June last year. The number has eased slightly but remains near record levels. The debate about who should be compelled to contribute to KiwiSaver — and at what rate — continues as National has proposed making it compulsory for all workers, per interest.co.nz's coverage of that policy.
Social media advice has added to the problem. Lockyer said there were a number of people offering guidance online about how people should be able to access their money — guidance that was not always accurate.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.