KiwiSaver hardship withdrawals have spiked to their highest in a decade last month, amid rising fuel prices.
According to the IRD, more than 5600 people withdrew their savings due to financial hardship - the second-highest amount ever since August 2016.
Over 49 million dollars was withdrawn, a 12.6 percent increase from March last year.
Simplicity chief economist Shamubeel Eaqub says the cost of living crisis, and the recent spike in job losses and business closures have all cumulated into the current increase.
"Mostly, what we're seeing at Simplicity is just that people have lost their jobs, they've lost their businesses, or they can't repay their mortgage - it's kind of life stuff. But the recession has real human cost."
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Speaker 1 (00:06):
You're listening to the Sunday Session podcast with Francesca Rudkin
from News Talks EDB.
Speaker 2 (00:12):
The New Zealand herold is reporting can we Save a Hardship?
Withdrawals spiked to a near record high last month, according
to the ID five six hundred and ten members. Withdrew,
can we say the savings the second highest month since
August two thousand and sixteen. To discuss what we are
seeing simplicity, Chief economist Shami Bill Yakub is with me. Now,
good morning, sho you Bill, Good morning. How worrying are
(00:36):
the numbers we're seeing when it comes to the key
we saver withdrawals?
Speaker 3 (00:40):
Look, it's pretty worrying. So in the last twelve months,
we've had about sixty thousand people withdrawal for hardship reasons.
The background kind of rate is about twenty thousand, so
it's about three times the normal rate. And what is
telling us is there is there's a huge amount of
poverty in New Zealand that has really been exposed in
the last two to three years.
Speaker 2 (00:58):
How long have we been seeing this? Is it a trend?
Can we call it a trend?
Speaker 3 (01:02):
Oh? Absolutely, I mean it's been rising pretty much as
the recession took hold. So initially it was the cost
of living crisis. Then we had the job losses and
the business closures, and those things have all accumulated into
what we're seeing at the moment. So it's very much
been the trend uputs of the last three years, very
much reflecting the state of the economy.
Speaker 2 (01:21):
Do we know why people are withdrawing this money in
the sense is it just to deal with day to
day life or is it to deal with a cost
which has come out of the blue that they just
can't manage.
Speaker 3 (01:31):
It's both of those things. So sometimes it's for medical reasons.
In your teeth, you need something major done with your teeth,
and it's extraordinarily expensive, and this is the last resort.
But mostly what we're seeing in simplicity is it's just
people who've lost their jobs or lost their businesses, or
can't repay their mortgage. It's kind of life stuff. But
the recession has real human cost, and there's human costs
(01:54):
are what we're seeing in the hardship withdrawals.
Speaker 2 (01:57):
Shamie belle I was a bit intrigued that what we're
seeing is worse than it was in COVID times. But
of course we had sort of wage payments and things
in COVID totally.
Speaker 3 (02:07):
Yeah, during COVID it was actually very low. So what
happens through that period was because everybody was carried through,
businesses didn't fail. Job losses were pretty modest except for
the right of the beginning of the COVID period. And
then we had a couple of years when things were
actually really good in the inside of the economy. And
so it's very much been more of a story since
(02:28):
then when we've had the cost of living crisis, interest
rates increase, government spending reduced, all of that, has had
the engineered recession that we've had for the last couple
of years that has really compuned the costs on households.
Speaker 2 (02:40):
So, considering the current climate, do you expect those numbers
to keep climbing? Do you think there's an end in
sight here?
Speaker 3 (02:47):
Sadly no, and that's because there are still lots of
pressure and pressures in households. So the most immediate you
were just having this conversation before, was the conflict in Iran,
and that had a big impact on fueld costs, and
it's that unavoidable cost. It just makes even less kind
of financial sense for people. So what we see is
if you're an unemployed person or you'd just at the
(03:08):
kind of edge of your financial comfort, the q motive
cost of increases and things like food, the electricity rates, insurance, fuel,
these have all just kind of really taken away people's buffers.
And if one of you loses your job in a family,
that means that your income has fallen, you might not
be able to access welfare and you're really stuck. And
(03:29):
that's where the income, the money from the hardship can
be really helpful. The average amount of people are taking
out is about close to nine thousand dollars, which is
roughly six hundred and seventy five dollars a week, because essentially,
when you get hardship withdrawal, it's for about thirteen weeks
of necessity's costs.
Speaker 2 (03:47):
Withdrawing the money, obviously it can ease that immediate financial apprecure,
but it is going to have a flow on impact
on retirement savings, isn't it totally?
Speaker 3 (03:56):
Totally? And we know that. You know, if you're a
thirty year old towhere that's taking out that close to
that nine thousand dollars an average, you're going to have
about forty thousand dollars less at retirement. But the trade
here is that if you are in real hardship now,
and the requirements are actually really tough to get access
to the hardship. So you know, it's not like it's
easier to just go to the guro quser of providing
(04:17):
with the money. You have to prove that you are
under quite a lot of financial pressure. So I'm in
two minds about this because I think qvserver is no
longer a retirement policy or tool anymore. It's for a
lot of different things. It's for that rainy day fund,
for the last result savings, it's for your first time
buyer thing as well as retirement. So it has become
very confused over time.
Speaker 2 (04:39):
What advice do you have for people who are considering
a withdrawal of the Q saver savings?
Speaker 3 (04:45):
Look, it is a last resort. It is really difficult.
Getting access to financial advice is really helpful. So you
can get really good budgeting advice from financial mentors. That's
probably the first step. I think if you do that
quite often people will find that they might be able
to increase their incomes, they might be able to balance
their budgets better. But for those who have no other resort,
(05:06):
then this is absolutely a legitimate thing to do. But
think about the potential costs in the future. It's going
to be very much the right thing to do for
some people, but for a lot of people there will
be other options.
Speaker 2 (05:17):
Chami, Bill, thank you so much. That was simplicity. Chief
economist Shamy Bill Jakob there.
Speaker 1 (05:23):
For more from the Sunday session with Francesca Rudkin. Listen
live to News Talks it Be from nine am Sunday,
or follow the podcast on iHeartRadio.
You're listening to the Sunday Session podcast with Francesca Rudkin
from News Talks EDB.
Speaker 2 (00:12):
The New Zealand herold is reporting can we Save a Hardship?
Withdrawals spiked to a near record high last month, according
to the ID five six hundred and ten members. Withdrew,
can we say the savings the second highest month since
August two thousand and sixteen. To discuss what we are
seeing simplicity, Chief economist Shami Bill Yakub is with me. Now,
good morning, sho you Bill, Good morning. How worrying are
(00:36):
the numbers we're seeing when it comes to the key
we saver withdrawals?
Speaker 3 (00:40):
Look, it's pretty worrying. So in the last twelve months,
we've had about sixty thousand people withdrawal for hardship reasons.
The background kind of rate is about twenty thousand, so
it's about three times the normal rate. And what is
telling us is there is there's a huge amount of
poverty in New Zealand that has really been exposed in
the last two to three years.
Speaker 2 (00:58):
How long have we been seeing this? Is it a trend?
Can we call it a trend?
Speaker 3 (01:02):
Oh? Absolutely, I mean it's been rising pretty much as
the recession took hold. So initially it was the cost
of living crisis. Then we had the job losses and
the business closures, and those things have all accumulated into
what we're seeing at the moment. So it's very much
been the trend uputs of the last three years, very
much reflecting the state of the economy.
Speaker 2 (01:21):
Do we know why people are withdrawing this money in
the sense is it just to deal with day to
day life or is it to deal with a cost
which has come out of the blue that they just
can't manage.
Speaker 3 (01:31):
It's both of those things. So sometimes it's for medical reasons.
In your teeth, you need something major done with your teeth,
and it's extraordinarily expensive, and this is the last resort.
But mostly what we're seeing in simplicity is it's just
people who've lost their jobs or lost their businesses, or
can't repay their mortgage. It's kind of life stuff. But
the recession has real human cost, and there's human costs
(01:54):
are what we're seeing in the hardship withdrawals.
Speaker 2 (01:57):
Shamie belle I was a bit intrigued that what we're
seeing is worse than it was in COVID times. But
of course we had sort of wage payments and things
in COVID totally.
Speaker 3 (02:07):
Yeah, during COVID it was actually very low. So what
happens through that period was because everybody was carried through,
businesses didn't fail. Job losses were pretty modest except for
the right of the beginning of the COVID period. And
then we had a couple of years when things were
actually really good in the inside of the economy. And
so it's very much been more of a story since
(02:28):
then when we've had the cost of living crisis, interest
rates increase, government spending reduced, all of that, has had
the engineered recession that we've had for the last couple
of years that has really compuned the costs on households.
Speaker 2 (02:40):
So, considering the current climate, do you expect those numbers
to keep climbing? Do you think there's an end in
sight here?
Speaker 3 (02:47):
Sadly no, and that's because there are still lots of
pressure and pressures in households. So the most immediate you
were just having this conversation before, was the conflict in Iran,
and that had a big impact on fueld costs, and
it's that unavoidable cost. It just makes even less kind
of financial sense for people. So what we see is
if you're an unemployed person or you'd just at the
(03:08):
kind of edge of your financial comfort, the q motive
cost of increases and things like food, the electricity rates, insurance, fuel,
these have all just kind of really taken away people's buffers.
And if one of you loses your job in a family,
that means that your income has fallen, you might not
be able to access welfare and you're really stuck. And
(03:29):
that's where the income, the money from the hardship can
be really helpful. The average amount of people are taking
out is about close to nine thousand dollars, which is
roughly six hundred and seventy five dollars a week, because essentially,
when you get hardship withdrawal, it's for about thirteen weeks
of necessity's costs.
Speaker 2 (03:47):
Withdrawing the money, obviously it can ease that immediate financial apprecure,
but it is going to have a flow on impact
on retirement savings, isn't it totally?
Speaker 3 (03:56):
Totally? And we know that. You know, if you're a
thirty year old towhere that's taking out that close to
that nine thousand dollars an average, you're going to have
about forty thousand dollars less at retirement. But the trade
here is that if you are in real hardship now,
and the requirements are actually really tough to get access
to the hardship. So you know, it's not like it's
easier to just go to the guro quser of providing
(04:17):
with the money. You have to prove that you are
under quite a lot of financial pressure. So I'm in
two minds about this because I think qvserver is no
longer a retirement policy or tool anymore. It's for a
lot of different things. It's for that rainy day fund,
for the last result savings, it's for your first time
buyer thing as well as retirement. So it has become
very confused over time.
Speaker 2 (04:39):
What advice do you have for people who are considering
a withdrawal of the Q saver savings?
Speaker 3 (04:45):
Look, it is a last resort. It is really difficult.
Getting access to financial advice is really helpful. So you
can get really good budgeting advice from financial mentors. That's
probably the first step. I think if you do that
quite often people will find that they might be able
to increase their incomes, they might be able to balance
their budgets better. But for those who have no other resort,
(05:06):
then this is absolutely a legitimate thing to do. But
think about the potential costs in the future. It's going
to be very much the right thing to do for
some people, but for a lot of people there will
be other options.
Speaker 2 (05:17):
Chami, Bill, thank you so much. That was simplicity. Chief
economist Shamy Bill Jakob there.
Speaker 1 (05:23):
For more from the Sunday session with Francesca Rudkin. Listen
live to News Talks it Be from nine am Sunday,
or follow the podcast on iHeartRadio.
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