Should you withdraw KiwiSaver funds to pay for your first home?

5 min read

The number of New Zealanders withdrawing money from their KiwiSaver account to help purchase a first home is increasing year on year, and we expect the trend to continue into the future.

You’ve worked hard and saved even harder to get your KiwiSaver balance looking healthy, so it’s not always an easy decision to dip into it when you find your dream home. Will you have enough to retire on tomorrow if you withdraw a lump sum today? What if the housing market crashes? How can you afford to keep contributing to KiwiSaver if you have a mortgage to pay?

There’s a lot to think about, so before you decide to access your KiwiSaver savings to fund your first home purchase, here are some things to consider.

Times are changing

New Zealand's superannuation system was originally based on the principle that people would own their own homes by the time they reached retirement. However, home ownership is now out of reach for many Kiwis who must rent, possibly forever. This means many of us need to save a lot more than initially forecast to take rent payments into account during retirement.

It’s important to note that if you decide not to withdraw funds to buy a home, it doesn’t mean retirement will be easy. The savings you’re currently putting aside may not cover the rising cost of rent in our major cities and so you may need to consider increasing your contributions to give yourself a more comfortable retirement.

Saving with KiwiSaver is still a great option

By putting your savings into a KiwiSaver account in the first place you benefit from your own contributions, those of your employer, the annual Member Tax Credit  from the government, and potential investment returns. In contrast, a standard term deposit or savings account only pays interest on your contributions. KiwiSaver is however, a managed fund, which means you invest in a diverse range of investments such as company shares and bonds. Because of this, your savings are exposed to market volatility and positive returns are not always guaranteed, whereas bank savings accounts will generally return the agreed interest rate.

How could a withdrawal affect my retirement?

By taking funds out of your KiwiSaver account, you are reducing the savings you had set aside for retirement. But owning a home is still seen as a critical step in being financially secure in retirement, so if withdrawing your funds helps you achieve that goal, is that necessarily a bad thing?

Rather than thinking about your decision as either owning a home or having a comfortable retirement, consider it this way: Would you rather invest your money in property, or in a managed fund? The NZ housing market has slowed recently, but experts expect price rises again in the next few years. In the same vein, New Zealand has a strong economy with good returns on market investments. Whichever you choose, we’d always recommend you talk to an Authorised Financial Adviser so you fully understand both options.

Don’t stop contributing once you’ve bought a house

The most important thing to remember is to keep contributing to your KiwiSaver once you’ve bought your first home. It’s true that owning a home gives you some financial security, but you can't eat your house so whilst you should focus on paying down your mortgage it's just as important to keep up with your KiwiSaver contributions.

You’ve got some great savings habits already, that’s how you’ve accumulated such a good KiwiSaver balance in the first place - don’t let those habits slip. You may have to reduce your contribution percentage in the first few years, while you pay down your mortgage, but just don’t stop them all together.

Here’s our guide to paying off your home loan quicker.

Extra financial support from the Government

You may also be entitled to an additional $5000 or $10,000 as part of the government HomeStart grant. To qualify you must meet strict income and house price caps (see table below), and you must have been actively contributing to your KiwiSaver account for at least three years.

City Maximum house price
(to quality for grant)
Auckland $600,000
Wellington $550,000
Christchurch $550,000
Rest of NZ $450,000


BNZ Investment Services Limited, a wholly owned subsidiary of Bank of New Zealand (‘BNZ’), is the issuer and manager of the BNZ KiwiSaver Scheme. A copy of the BNZ KiwiSaver Scheme product disclosure statement is available on Investments made in the BNZ KiwiSaver Scheme do not represent deposits or other liabilities of BNZ or any other member of the National Australia Bank Limited group, and are subject to investment risk, including possible delays in repayment and loss of income and principal invested. None of BNZ or any other member of the National Australia Bank Limited group, the Supervisor, and any other director of any of them, the Crown or any other person guarantees (either fully or in part) the performance or returns of BNZ KiwiSaver Scheme or the repayment of capital.

This publication is solely for information purposes and is only for BNZ KiwiSaver Scheme members who are New Zealand residents. None of the matters in this publication are personalised financial advice. We recommend that you seek financial advice specific to your personal situation and goals from an Authorised Financial Adviser. No representation or warranty is made as to the accuracy, reliability or completeness of any statement made in this publication. Neither BNZ nor any person involved in the preparation of this publication accepts any liability for any loss or damage arising out of the use of, or reliance on, all or any part of this publication. The information and recommendations are the personal views of the author and do not necessarily reflect the views of BNZ.