Can I withdraw from KiwiSaver to repay debt?

In 2021, Anna’s and Richard’s household income fell 50% due to personal circumstances. As a result, they were unable to meet their weekly living expenses.

In November 2021, Anna and Richard applied to withdraw all funds from their KiwiSaver accounts. They wanted to pay down debt so they could afford their ongoing living costs.

The supervisor of their KiwiSaver scheme approved partial withdrawals. The supervisor explained to Anna and Richard that they could only release funds to repay overdue debts and to cover the shortfall between Anna’s and Richard’s income and essential living expenses.

Anna and Richard were not satisfied with this. They wanted to make full withdrawals so they could pay down debt to a manageable level. Partial withdrawals only prolonged and exacerbated their worsening financial situation.

Anna and Richard asked FSCL to review the supervisor’s decisions. By the time we reviewed the complaint, Anna’s and Richard’s debts were around $70,000. They had withdrawn a total of around $34,000 from their KiwiSaver accounts, and they had around $22,000 left invested.


Anna and Richard believed they met the statutory criteria to withdraw from KiwiSaver on the ground of significant financial hardship, and that they had demonstrated to the supervisor how a full withdrawal would alleviate their financial situation. Releasing limited amounts at a time, as the supervisor had done, was not alleviating their hardship.

The supervisor empathised with Anna’s and Richard’s situation, but they could not allow a withdrawal to pay down debt. The supervisor could only consider debt servicing costs.

The supervisor offered to process a further $15,000 withdrawal, being an advance on future living expenses. They suggested that Anna and Richard explore other ways to manage their debt, such as contacting their bank again to discuss their debts or speaking with a financial mentor.


We concluded that Anna and Richard should discontinue their complaint because the supervisor had made a reasonable offer. Under our rules, known as our terms of reference, we can decline to investigate a complaint if, on the facts presented by the consumer, the scheme member has made a reasonable offer to settle the complaint.

We agreed with the supervisor that the law did not allow them to release money early from Anna’s and Richard’s KiwiSaver accounts so they could make lump sum debt repayments. 

KiwiSaver scheme supervisors must follow the KiwiSaver Act 2006 when considering early withdrawal applications. A supervisor can allow an early withdrawal if they are reasonably satisfied the member is suffering, or is likely to suffer, from significant financial hardship. This includes the member being unable to meet their minimum living expenses. Debt servicing costs are included when assessing the member’s living expenses.


Anna and Richard accepted our view. They agreed to the supervisor’s offer to release further funds as an advance on their living expenses, in final settlement of their complaint.

Insights for consumers

Many KiwiSaver members believe their financial position would improve if they could make an early withdrawal from their KiwiSaver account, for example, to use their savings to repay debt or to start a small business. However, that is not the purpose of KiwiSaver. It is designed to help people buy their first home and to save for their retirement. The threshold to be eligible for an early withdrawal is deliberately high.