KiwiSaver: A Great Tool, but out of reach for many
KiwiSaver is a powerful savings scheme designed to help New Zealanders prepare for retirement. It is voluntary, easy to set up, and the earlier you start, the more you benefit.
For instance, a 21-year-old earning minimum wage of $48,880 annually and contributing regularly could save around $409,046 by the time they turn 65, according to the Sorted website.
It is not just about retirement; after three years of contributing, members can also withdraw KiwiSaver funds to purchase their first home. This has been a game-changer for many. But for others, particularly low-income families, this opportunity remains out of reach.
At Māngere Budgeting Services Trust, we are seeing a growing number of clients forced to access their KiwiSaver early, not to buy a home, but to survive.
Take the case of one whānau we are supporting: both parents lost their jobs, and one is now on ACC. They are facing mounting arrears and have had to dip into their KiwiSaver just to stay afloat, sacrificing their retirement security in the process.
Another client, working full-time, is buried in debt. After paying off loans and covering essential bills, there is nothing left for basics like food or electricity. For them, withdrawing KiwiSaver became the only option.
One man, recovering from a serious injury, had no income and ended up living in his car. With nowhere else to turn, he used his KiwiSaver just to get back on his feet.
“We are seeing more and more people who feel like they have no choice but to withdraw their KiwiSaver,” says Jack Leary, Financial Mentor at Māngere Budgeting Services. “Early intervention is key. If people come to us sooner, we can explore other options such as debt consolidation, refinancing, or budgeting support, before things get out of hand.”
The situation is set to become even more challenging.
From 1 July, the Government’s contribution to KiwiSaver will be reduced to 25 cents for every $1 contributed by members, capped at just $260.72 per year. This may seem minor, but for low-income earners, the Member Tax Credit has made up a significant portion of their total KiwiSaver savings. The cut will hit them the hardest.
“KiwiSaver hardship applications continue to rise, which is deeply concerning,” says Lara Dolan, Chief Executive of Māngere Budgeting Services. “We are seeing more than 25 hardship applications each month, essentially, one of our clients is tapping into their retirement savings every single day. These withdrawals provide short-term relief, but they come at the cost of long-term well-being.”
At Māngere Budgeting Services, we believe in financial empowerment for all. We encourage anyone facing financial difficulty to reach out for support early, before dipping into their retirement savings.
There are often better options, and we are here to help!