By Mike Bain/cvnznews.com
New Zealanders receiving a benefit are being urged to think carefully before tapping their KiwiSaver for financial hardship, with officials warning that withdrawals can unintentionally affect entitlements.
The Ministry of Social Development (MSD) says many people don’t realise that once money is taken out of KiwiSaver, it is treated like any other cash asset — and in some cases, as income. That can influence payments such as the Accommodation Supplement or Temporary Additional Support.
Graham Allpress, MSD’s group general manager of client service delivery, said the impact varies from person to person, but anyone considering a hardship withdrawal should check first.
“A one‑off KiwiSaver withdrawal is generally not treated as income for benefit purposes,” he said. “However, if someone makes regular or scheduled withdrawals — for example every three months — those payments could be considered income under the Social Security Act.”
The Act defines income as any periodical payment from any source, even if the payment comes from capital. Allpress said the withdrawn funds also become a cash asset, which can reduce eligibility for certain supports. “The amount someone can withdraw before it affects their benefit depends on their other income and the assets they already hold.”
Hardship withdrawals have surged. In March alone, more than $49 million was withdrawn by 5610 people, higher than the same month last year. Over the year to March, more than 60,000 hardship withdrawals were approved — around triple pre‑pandemic levels.
Financial commentator Ana‑Marie Lockyer said the rules often catch people off guard. “It’s not a KiwiSaver rule — it’s how the benefit system works. Once the money is out, it’s treated like any other asset. People don’t naturally think of their KiwiSaver that way, and that’s where the disconnect happens.”
She said the biggest risk is for people making regular or staged withdrawals, especially those receiving accommodation support. “What feels like sensible budgeting can unintentionally reduce entitlements. KiwiSaver decisions never happen in isolation.”
MSD is encouraging people to contact the ministry before withdrawing to check whether other assistance is available. “There may be support options that don’t require touching KiwiSaver,” Allpress said.
