Financial pressures, including lockdowns and job losses have led to a 43 percent rise in KiwiSaver members withdrawing funds for financial hardship.
And an 18.8 percent rise in first-home withdrawals shows more Kiwis are turning to KiwiSaver to help them save for a first home.
A KiwiSaver annual report released by the Financial Markets Authority (FMA) on Tuesday, shows cash-strapped Kiwis withdrew $159.3 million from their KiwiSaver accounts in the year to March 31, 2021, up from $111.5 million the year before.
The reporting period includes the level 4 and level 3 lockdown (March to May 2020) and the rise in unemployment, which peaked at 5.3 percent in the September 2020 quarter.
KiwiSaver members experiencing 'significant financial hardship' are able to apply to withdraw personal and employer contributions from their KiwiSaver account.
The report shows 21,000 hardship withdrawals were made, averaging $7584 each. The year before (March 2019 to May 2020), there were 17,534 withdrawals, averaging $6,359 each.
The conversation of withdrawing money from KiwiSaver can be stressful and "never easy", Paul Gregory, director of investment management at FMA, told Newshub.
But it's important members are made aware of other avenues of financial support (such as Government support packages), before turning to funds earmarked for a first home and/or for their retirement.
"KiwiSaver has a long-term purpose...members need to be reminded that hardship withdrawals need to be a last resort," Gregory said.
Total KiwiSaver member withdrawals over the year amounted to $3.05 billion, up 7 percent. The average (mean) KiwiSaver account balance was $26,410, up 29 percent year-on-year.
KiwiSaver fund switches were down 9.3 percent from the previous year, when high market volatility over February and March caused the number of switches to jump.
$1.4 billion withdrawn for first-homes
KiwiSaver members contributing for at least three years can withdraw most of their funds to buy a first home.
First-home withdrawals rose 18.8 percent to $1.4 billion in the year to March 2021, up from $1.2 billion in 2020 and $953 million in 2019.
Members withdrawing most of their KiwiSaver money to get onto the property ladder are reminded to restart contributions as soon as they can.
"Once somebody has got something out for a first-home, the other purpose of KiwiSaver comes into play, which is retirement," Gregory said.
$1.22 billion withdrawn for retirement
The over 65 age group withdrew $1.22 billion, down 8.3 percent year-on-year. Although members can withdraw all of their KiwiSaver funds at age 65, members of this age group exiting KiwiSaver dropped 14 percent, to 19,512.
Members aged 65 plus grew by 15 percent, to 147, 331.
"Since 1 July 2019, over-65s have been allowed to join KiwiSaver and it is clear that more are continuing to leave money within the scheme beyond retirement age," the report said.
A rule change from March 26 also allows people with congenital, life-shortening and rarer conditions, to apply to withdraw funds.
$650.3 billion paid in fees
Total funds under management was $81.6 billion, up 31.7 percent. Investment returns reached $13.2 billion, up 1708.4 percent, the KiwiSaver annual report shows.
Off the back of high investment returns, fee revenue rose almost 21 percent (20.7 percent), to $650.3 million. Administration fees dropped 4.8 percent to $80.8 million, as a number of KiwiSaver schemes cut or changed the structure of administration fees.
Paul Gregory said part of the reason why total fees increased is because they're based on a percentage of returns, which rose significantly. But across the industry, he's concerned the benefits of scale aren't being sufficiently shared with members.
Several providers have reduced management fees or in a couple of cases, had removed administration charges altogether.
"That's a general trend that we want to see...revenue per member flattening off, we'll see that start to happen in the next KiwiSaver annual report," Gregory said.
Checking value for money
Although value can be subjective, Paul Gregory said KiwiSaver members who are unsure whether they're getting value for money can ask themselves two things:
1. Whether their provider helps them make good financial decisions (e.g. regular communication, advice when requested).
2. Whether the provider's actions are contributing to their KiwiSaver balance (and that they're getting their fair share of it).
Clive Fernandes, director of KiwiSaver advice provider National Capital, said members paying higher fees for actively managed funds should make sure that's what they're getting.
They could read the KiwiSaver provider's 'SIPO' - Statement of Investment Policy and Objectives. This is usually found in the documents section of their website.
Low-cost providers (such as Simplicity), don't provide advice. Members should weigh up the importance of advice for their own situation, particularly as their goals change.
"Research has shown that individuals who received KiwiSaver financial advice earned an average of 4 percent higher returns," Fernandes said.
Members could look at their KiwiSaver provider's net returns after fees, and compare it to competitors. Online tools such as The Sorted Smart Investor tool provide a comparison of fees and past investment returns.
At the end of March, 356,021 members had money invested with a default provider, meaning they hadn't made an active choice.
From December 1, 2021, the current nine default KiwiSaver providers will reduce to six (BNZ, BT funds/Westpac, Booster, Kiwi Wealth, Simplicity and Smartshares).
The default fund will change from a cash-based 'conservative' fund to a 'balanced' fund, a timely reminder for members in one of these funds to check it meets their needs.