KiwiSaver withdrawals for hardship reasons are happening at record levels, and there are warnings of more to come as a Christmas crunch hits.
The 4000 people who withdrew $38.4 million from KiwiSaver in October this year set a record for the retirement savings scheme.
Supervisor Public Trust said its data for the past two years showed there could be more to come, because there was usually a seasonal spike in hardship withdrawals nearing Christmas.
"Already November is on track to be one of the year's busiest months in terms of volumes of hardship applications, and we're anticipating the trend will continue in December.
"They'll likely drop back in January, reflecting the close-down period for providers," a spokesperson said.
"Financial worries can overshadow what should be a time of celebration. The vast majority of people who apply at this time are in genuine hardship and their applications provide evidence to back that up - they struggling to pay their living expenses for essential things like groceries, power bills, rent and transport."
People can apply for a hardship withdrawal when they cannot pay for essential living expenses without incurring a deficit, are suffering a serious illness or need to pay for medical treatment.
Withdrawals can be approved for things like buying a car to get to work. KiwiSaver can not be used to pay off debt, but can be used in situations where people are in arrears.
The Public Trust said it was up to individuals to ensure they used their funds appropriately.
But if someone applied again in future, the supervisor would be able to see whether they had paid the bills they said they were going to pay with the money.
Shirley McCombe, of Bay Financial Mentors, said she was seeing a lot of people trying to find extra money at the moment.
She said she would always look to find a way to deal with it other than a KiwiSaver withdrawal.
"Because often, if we don't support the person to address the underlying causes of hardship, they will end up in the same position in six months' time - but with a reduced KiwiSaver balance."
She said she would ask whether people were receiving all the support they were entitled to.
"This isn't just from Work and Income and IRD, it might also include ensuring everyone living in the home is contributing in a fair and equitable way."
She would also go through people's expenses with them to understand where they could reduce costs.
Sometimes it might be possible to find lower-interest options for debt, and she would look at how debt could be managed and eliminated.
"Sometimes there is no other way, but there are often other options, but people are reluctant to make the necessary changes.
"The important thing to know about services such as ours is that we will support and guide, but ultimately, it is the client's journey, and they choose the path they want to take."
Another financial mentor, Teresa White from Auckland Central budgeting, said sometimes people were looking for help because they had lost a job and did not have enough to live on.
"Sometimes people don't have enough to pay the bills."
She said some people on a benefit might not be in a budget deficit each week because they were scrimping to live within their means. "But it's not sustainable."
When annual costs were added that could be expected, it put them into deficit, she said.
Credit data company Centrix said January was usually the peak of the "arrears cycle".
