KiwiSaver home buyers put retirement at risk

Dipping into KiwiSaver a gamble, experts warn.

People who raid their KiwiSaver accounts to buy a home may be putting a comfortable retirement at risk, experts warn.

More than 100,000 people have used KiwiSaver to buy their first home since the scheme launched in July 2007, taking out more than $1.7 billion. But the average amount people removing money has spiked in the wake of a government change in 2015 which allowed people to take out all except $1000.

In 2014 the average withdrawal was $12,500. In the 10 months to April 30 it was more than $20,000. Wellington

first-home buyers had the country’s highest withdrawal rate at $22,520.

Massey University Kiwisaver expert Claire Matthews said first-home withdrawals could make it harder to save for retirement, especially for older savers.

“If you are doing it in your 20s I’ve got no concern. Early 30s — you’ve got time to catch up. But once you get to 35 it is starting to get difficult. Over 40 I would be really nervous.”

Matthews said older home-buyers could help themselves out by leaving some savings in KiwiSaver and saving more. She urged people to save for a home outside of KiwiSaver.

Figures obtained by the Herald on Sunday show in the 11 months to May 31, $592m had been taken out of KiwiSaver for home withdrawals. That was up from $495m in the year to June 30, 2016. Those figures had skyrocketed from $258m in the year to June 2015 and $159m in 2014.

Julian Lingard, a financial adviser with Lifetime, who advises people on both mortgages and KiwiSaver, was also concerned about the number of people asking to take contribution holidays after buying their first home.

“I think there is a real danger if you don’t remain committed to saving that money.”

Lingard said many increased contributions to 8 per cent to save for a house but cut it to 3 per cent afterwards.

David Boyle, group manager investor education at the Commission for Financial Capability, said owning a home was part of being in a good position at retirement and the key was continuing to save after buying.

“If you are going to be in good shape for retirement, you are going to be in a better position if you have a mortgage-free house.”