The way younger people are approaching KiwiSaver is shifting in the face of first-home withdrawals, according to two KiwiSaver providers.
In the past five years, KiwiSaver members have withdrawn almost $6.4 billion in first-home withdrawals.
Data from Inland Revenue – the central administrator of KiwiSaver – shows $6.4 billion was withdrawn by 204,570 members between June 2019 and June 2024.
This amounts to an average first-home withdrawal amount of $31,245 per member during that time. The average first home buyer withdrawing money from their KiwiSaver is 37 years old.
The KiwiSaver Act 2006 was amended in 2015 to allow first-home withdrawals for house-related purchase payments, such as deposits.
KiwiSaver, introduced in 2007, is a voluntary savings scheme to encourage retirement savings.
Members can choose to contribute 3%, 4%, 6%, 8%, or 10% of their before-tax pay and employers must also contribute a minimum of 3% to their employees’ KiwiSaver.
According to research firm Morningstar, KiwiSaver funds under management rose by $3.5 billion to $110.8 billion in the June 2024 quarter.
As of June 2024, there are currently 3,349,489 active KiwiSaver members. The number of active KiwiSaver members has risen by 60,000 since June 2023.
The largest KiwiSaver demographics are those aged 24–34, with 743,602 members, and those aged 35–44, with 702,348 members.
Younger people are looking at how they can maximise their KiwiSaver for first-home withdrawals, according to Kernel’s head of marketing and strategy Catherine Emerson.
“The conversation is really geared to how should I be investing my KiwiSaver in order to get to my first home deposit? As opposed to thinking from day dot, how am I investing or thinking about my KiwiSaver in order to use this for my retirement?”
The investing platform and KiwiSaver provider has been running its KiwiSaver scheme since 2022. Emerson said the average age of Kernel’s customer base is 38 and 36% of Kernel’s KiwiSaver withdrawals in 2024 so far have been for first-home deposits.
“It certainly feels like it's a scheme in people’s minds that has two distinct use cases. But the challenge with that is that as the property market has increased exponentially and wages haven't kept pace, the average age of home ownership [is] obviously getting kind of higher and higher, you then start pushing the period in which you think about KiwiSaver as a source of retirement funds to be later and later in life,” she said.
“And so [it’s] trying to find some kind of balance between, yeah, financially getting into your first home, but not also cutting yourself off at the legs in terms of your retirement savings for that longer term.”
John Berry, the co-founder of Pathfinder, a fund manager and KiwiSaver provider, said close to one in three people are taking KiwiSaver money out to buy a first-home.
He said the current amount of first time buyers withdrawing KiwiSaver money for first-home deposits isn’t undermining KiwiSaver because it’s only around 1% of members per year, according to the Retirement Commission.
“But over a long period, actually 1% a year, over 20 years adds up to 20% of people in KiwiSaver and actually becomes quite a bit more significant,” Berry said.
Pathfinder has been running its KiwiSaver scheme for five years, adding KiwiSaver to its fund management services back in 2019.
Using KiwiSaver as a first time home buyer means people in their twenties and thirties are spending a lot of time in conservative KiwiSaver funds, Berry said.
“They sit on a conservative fund, which is much more stable than a growth fund. But in a conservative fund, you miss out on the opportunity for high growth returns when markets are really rallying.”
He said first home buyers made up 20% of house purchases in 2015 – when people were allowed to take the money out of KiwiSaver for first home deposits – and that statistic is currently sitting at 26%.
“First time buyers are actually quite a significant part of the housing market in New Zealand.”
Based on the behavior that Pathfinder has seen from members over time, Berry said people who take their KiwiSaver out for a first time deposit are generally continuing to make their 3% contributions and taking the compulsory 3% from their employer.
There’s also a trend of changing their risk profiles from conservative to growth post first-home purchase.
“You want to be getting growth out of [your KiwiSaver] and it will be bumpier on the way through, but you won't get the same returns from a conservative fund as you will from a growth fund over an all time horizon,” he said.
New rules to KiwiSaver shouldn’t be added, he said, and there needed to be limits around the ability to withdraw because KiwiSaver was a retirement product and shouldn’t be seen as a cash account.
“When a country is building a superannuation product like KiwiSaver to provide dignity and retirement, essentially what you want is consistency and certainty around rules so you're not tinkering with rules too often.”
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