KiwiSaver tops $120b but hardship withdrawals soar to record heights

Wednesday, 10 September 2025

KiwiSaver has smashed through the $120 billion mark for the first time, but the milestone comes as more people than ever are dipping into their savings early.

The Financial Markets Authority Te Mana Tātai Hokohoko (FMA) released its annual report on Wednesday, showing total KiwiSaver funds grew 10.1% to $123.1b in the year to March 2025.

Growth was driven by record $12.2b in contributions by members, employers and the Crown, alongside $6.4b in investment returns. Chief executive Samantha Barrass said the result showed KiwiSaver had proven resilient despite economic headwinds.

“There is probably no other financial product that is so closely associated to the future financial wellbeing of New Zealanders as KiwiSaver,” Barrass said. “This year’s annual report shows KiwiSaver has become a trusted scheme that is firmly recognised as the primary retirement savings strategy for most New Zealanders.”

The report came a few days after New Zealand First floated the idea of compulsory KiwiSaver with contributions from employers and employees rising to 10%, as Willis addressed the Financial Services Council conference in Auckland, where she said “my view is that no serious political party can go to the next election without a policy on superannuation or KiwiSaver.”

Record hardship withdrawals

But the report highlighted the sharpest rise in hardship withdrawals yet. FMA saw $443.6 million in hardship withdrawals in the last year, up 51% on 2024, with the average hardship withdrawal at just over $10,000. More than 44,000 members accessed their KiwiSaver accounts, a record.

Markets, Investors and Reporting director John Horner said the jump reflected “more challenging economic conditions and labour market” pressures.

In total, KiwiSaver members withdrew just under $6b from their accounts in the past year, also the highest level to date. Retirees aged 65 and over took out $3 billion, while first-home buyers withdrew $1.8 billion. Since 2010, more than $11b was withdrawn to help members buy their first homes.

The financial hardship category was the fastest growing segment. The $443.6m withdrawn this year was up by $179m compared with 2024, highlighting the squeeze facing households.

Stark inequality

On top of hardship withdrawals, Barrass said the FMA was particularly concerned about the number of non-contributing members. In the last year, 30% of KiwiSaver members of working age were not contributing to the scheme.

That was about 1.2 million members not contributing to their retirement, up about 20% from 2010. Barrass said the regulator was concerned about the long-term impact of suspending or draining contributions.

“If this trend continues, we risk a stark inequality between the contributing and non-contributing members of our national retirement scheme,” she said.

Horner said the rise in non-contributors likely reflected cost-of-living pressures: “However, as individual circumstances improve, the challenge is to encourage members to restart contributions when they can.”

Barrass said the industry had a role to play in improving engagement, particularly with default members and those who had paused their contributions.

“For default KiwiSaver providers, there are obligations to engage with default members throughout their retirement savings journey, including during times of volatility, and near the end of a member’s savings suspension,” she said.

Protecting retirement savings

Fresh research from the Financial Services Council (FSC) showed New Zealanders want to strengthen the retirement savings scheme, even as more people leaned on it during tough times.

FSC surveyed 1000 Kiwi and found 62% supported lowering the entry age to 16. Meanwhile 59% supported lifting the default contribution rate from 3% to 4% after the coalition Government’s Budget announcement this year.

The Budget announcement also halved the Government’s annual contribution which 66% of respondents opposed.

There was also strong opposition to broadening business access to funds, as 70% opposed allowing members to withdraw savings to buy shares. Meanwhile 60% opposed access for purchasing livestock and 45% opposed access for buying a farm, which was already permitted under current settings.