KiwiSaver when you're out of work: pause, hardship withdrawal or leave it?

What happens to KiwiSaver when you lose your job

• Your balance stays with your provider and remains invested.
• Employer contributions stop at your last pay. Final pay and any redundancy payments may still have KiwiSaver contributions deducted, depending on the payment type; check your payslip.
• Your own contributions stop unless you pay in directly. You can make voluntary contributions, but with no income most people shouldn't.
• The government contribution (as at October 2026) is 25 cents for every dollar you contribute in a year, up to a maximum of $260.72, and isn't paid if your taxable income is over $180,000. That means you need to contribute about $1,043 a year to get the full amount, so if you put in less, you get less. Source: Inland Revenue.
• Default contribution rates rose from 3% to 3.5% (you and your employer) on 1 April 2026, with a further rise to 4% due on 1 April 2028. Once you're back in work, you can ask for a temporary reduction back to 3% for 3 to 12 months.
• In general you can't withdraw your KiwiSaver until you reach 65, apart from specific early-access grounds such as significant financial hardship, serious illness or permanent emigration (check the grounds with IRD or your provider).
• Fees keep running. You might get a statement showing a falling balance if markets drop; that doesn't mean you've lost money you can't recover unless you sell at the bottom.

Option 1: savings suspension (contributions holiday)

A savings suspension lets you stop making KiwiSaver contributions for 3 to 12 months. You apply to Inland Revenue (through myIR, or their online form if you don't have a myIR account). Per IRD, if you've been a contributing member for a year or more you don't need to give a reason; for an earlier request you need to show financial hardship. The suspension starts when IRD approves it, IRD sends a notice with the dates for you to give your employer, and you can apply again when it ends. While suspended, deductions from your pay stop, and you can still make voluntary contributions. Your employer isn't required to contribute during a suspension, and you only get the government contribution on money you actually pay in, so you give up growth as well as cash. It's useful if you've just got a new job at lower pay and need cash flow; if you have no pay, there's little to suspend.

You can also apply for a temporary rate reduction to 3% for 3 to 12 months instead (not available while you have a savings suspension). Both are cheaper long-term than withdrawing.

Option 2: significant financial hardship withdrawal

Per Sorted's guide: you may qualify if you can't pay essential living costs such as food, rent or mortgage, power, medical treatment, disability home modifications, or in some cases funeral costs. You can't use it for credit card debt, fines, debt collection bills, non-essential hire purchase, holidays, or travel to see a sick relative.

1. Ask your provider for the significant financial hardship form.
2. Gather ID, income (including your partner's), weekly household expenses, assets, savings and debts.
3. Submit; the provider forwards it to the supervisor.
4. Wait for the decision, and ask for reasons if declined.

Should you withdraw?

Sorted's example: a 35-year-old with $22,000 in a growth fund who withdraws $20,000 could have about $74,000 less at 65 in future dollars, or about $41,000 less in today's dollars (assuming 2% annual inflation over 30 years). Compounding is why small withdrawals today are expensive later.

The supervisor will expect you to have tried other options first. A reasonable order:

1. Work and Income: Temporary Additional Support, food grants and benefit advances, even if you're working part-time.
2. MoneyTalks free budgeting, which can often find money you didn't know about.
3. Your lender or landlord: hardship arrangements.
4. Whānau support or a Good Loan from Good Shepherd.
5. Savings suspension or rate reduction if you still have income.
6. A hardship withdrawal, for what is truly essential.

Should you switch funds?

If you expect to withdraw money soon (within a year or two), a conservative or cash fund reduces the risk of selling after a fall. If you won't touch it for 10+ years, most people stay in a fund matching their time horizon. Check with your provider how often you can switch and whether it costs anything. Don't switch out of growth in a panic: locking in a market drop is the main way people lose money. Use Sorted's KiwiSaver fund finder or ask the FMA-licensed provider; this is general information, not personalised advice.