Commissioner asks: Does it need to get tougher to withdraw money from KiwiSaver?

New Retirement Commissioner David Boyle is seeking information on whether it is possible to tackle unnecessary KiwiSaver hardship claims.Almost $1.8 billion was withdrawn from the scheme for hardship reasons between 2012 and 2025. Of that, about $1.32b was withdrawn since 2020.Hardship applications can be made in situations where members are struggling to cover their basic costs. The application is initially processed by the KiwiSaver provider but the decision is made by the KiwiSaver scheme's supervisor.The number and amount of withdrawals slowed in August but commentators said that was likely to be shortlived, particularly in the run-up to Christmas.Boyle, who was previously head of KiwiSaver at Fisher Funds, said he wanted more information about what was happening.He said the amount being withdrawn was significant in its impact on the savings of future retirees."We're living in a challenging cost-of-living period of time and it's been exacerbated particularly this year by the oil shocks and those costs being passed on to customers, as well as interest rates starting to inch up again."He wanted to determine whether the rules had been relaxed for how hardship requests were processed and accepted."I'm looking to get some feedback from supervisors in time to get a better picture of that."James Douglas, chair of the independent board of Trustees Executors, said supervisors were working with guidelines when they assessed applications."Unfortunately those guidelines have expanded over time. I think we've become a little bit more lax."Boyle said it might be worth considering whether applicants should be required to have the money paid directly to what they said they needed to cover.KiwiSaver providers were often given a quote for something like a surgical procedure by members, but there was no clarity about whether the money genuinely went to that purpose when it was paid out, he said."I'm hoping it's not a large number of people doing that, I would doubt it. But you're completing a declaration that's in a legal sense a statement that is deemed to be factually accurate and those funds will be needed for that particular purpose."It's essentially breaking the law … I have certainly seen videos of influencers, so-called influencers, talking to specific groups around how they can game the system. And that's not particularly productive and shouldn't be encouraged at all, in my view."Financial Markets Authority shares concernsThe Financial Markets Authority's head of licensing and regulatory service Anita Frazer said the regulator shared that worry."We are concerned by any content that encourages people to provide false or misleading information in support of a KiwiSaver hardship withdrawal application."KiwiSaver hardship withdrawals are intended for people experiencing genuine significant financial hardship. Applications are assessed against the relevant criteria, and applicants are required to provide evidence of their circumstances."The rules are deliberately strict because accessing KiwiSaver savings early can have a significant impact on long-term retirement outcomes. Preventing fraud remains a regulatory priority for the FMA, as set out in the 2026/27 Financial Conduct Report. If we become aware of conduct that may involve fraud or the encouragement of fraudulent behaviour, we will consider the appropriate regulatory response based on the circumstances."Boyle said he also wanted to investigate whether people were using withdrawals for one-off needs."Or are they coming back for more and almost treating KiwiSaver like a bank account, which it's not designed for?"Christine Liggins, of Debtfix, which processes hardship applications for several KiwiSaver providers, said the rate seemed to have slowed in June and July but applications were increasing again now.She had been talking to government ministers about requiring any hardship claims to be paid directly to the cause of the hardship."I believe that this would halve the number of withdrawals that happen. Not only that but it will see funds [go] to the actual cause, so helping to alleviate the hardship too."Simplicity chief economist Shamubeel Eaqub said he would be concerned if it was made much more difficult to access money."It's their money. Is it the majority that are working around the rule? I would hate to see policies changed to catch a few bad actors."Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make and spend money