The debate over KiwiSaver funds revolves around whether they should be accessible for first home deposits or reserved solely for retirement. This decision has far-reaching implications for the housing market, access to homeownership, retirement security, and requires a delicate balance between these objectives.
___________________________________________
“I read a comment on another thread a while back from someone who thought that people should not be able to withdraw KiwiSaver to contribute to a deposit for a first home. That had me thinking about how big an impact that would have on the housing market. My husband and I have just bought our first home. We had a solid deposit, the overwhelming majority of which was our KiwiSaver balances. If we had been unable to utilise these, we would absolutely not have been in a position to buy – probably ever. So, if KiwiSavers were out – what would happen? Would prices tank as almost all first-home buyers would disappear from the market? And what are your thoughts on the idea – should KiwiSaver be locked down for retirement only?”
(Original question on Reddit)
___________________________________________
The question you’re referring to discusses whether KiwiSaver funds should be locked down for retirement only or if they should be allowed to withdraw to contribute to a deposit for a first home. This is a topic of debate, and it has significant implications for the housing market and people’s financial planning. Here are some key points to consider:
Impact on the Housing Market:
Allowing KiwiSaver funds to be used for a first home deposit has had a significant effect on the housing market in New Zealand. It has made it easier for first-time buyers to enter the market, which can, in some cases, drive up demand and affect housing prices. If this option were removed, it could lead to a decrease in demand from first-time buyers, which might, in turn, put downward pressure on prices. However, it’s important to note that numerous factors influence housing market dynamics, and the impact of such a change may not be immediate or uniform across the country.
Access to Homeownership:
Many first-time buyers rely on their KiwiSaver balances to accumulate a substantial deposit, making homeownership more attainable. Locking down KiwiSaver funds for retirement could only limit access to the property market for some individuals or extend the time it takes for them to save for a deposit.
Retirement Security:
The primary purpose of KiwiSaver is to provide financial security in retirement. Allowing early withdrawals for housing might jeopardise this objective for some individuals if they don’t contribute enough for their retirement. This has raised concerns about people needing more funds in their KiwiSaver accounts to support themselves during retirement.
Balancing Act:
The debate around KiwiSaver withdrawal policies involves finding a balance between helping people achieve homeownership and ensuring they have financial security in retirement. Some potential solutions include limiting the amount that can be withdrawn or introducing stricter criteria for eligibility to strike a balance between the two objectives.
The decision should be based on a combination of government policy, economic considerations, and the values and priorities of New Zealand society. It’s a complex issue with no one-size-fits-all answer, and it’s crucial for policymakers to consider the potential consequences and weigh the pros and cons of any changes to the KiwiSaver withdrawal rules.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
