The managing director of KiwiSaver fund manager Simplicity says the Government needs to make it easier for people facing hardship to withdraw their KiwiSaver savings early.
His comments come as the mother of a young girl with cancer struggles to access her own money in order to support her family.
After weeks of fighting to withdraw her savings, Teresa Butler says she finally received approval recently to access $8000 of her roughly $50,000 savings.
Her daughter Mya was diagnosed with Burkitt's lymphoma just days after her fifth birthday, Butler told The AM Show.
And although her child is "fighting it really well" Butler says the situation has put a strain on the family's finances.
Butler's husband has been forced to use up all his annual and sick leave in order to spend time with the family and has not received any pay since January. he even missed the birth of their second child as he was in the emergency department with Mya.
But the process of withdrawing her KiwiSaver money under the hardship clause has been anything but easy.
"I felt like I was asking for money that I shouldn't have any access to... it's my money," Butler told The AM Show.
"I've never had a benefit, I've worked since I was 18 fulltime, we've bought a house and the one time you need it for your child..."
Butler and her partner also have a 10-week-old baby. She is currently on maternity leave and was hoping to use her savings in part to continue her leave to spend time with her family.
"I essentially want to buy back some time. [Mya] lost her first day at school, my partner didn't even see the birth of his child - there's so much that we've missed," Butler said.
"What is the point of even having hardship criteria when you don't meet it unless it's way more tragic than this?"
Butler said she had to file "mountains of paperwork" to be allowed to access $8300 of her savings, which she was told was supposed to last her and her family for three months. She would then have to reapply if she wanted to access more money, she said.
Sam Stubbs, managing director of KiwiSaver fund manager Simplicity, says the Government needs to change the law to make it easier for people like Butler withdraw her money
"The Government needs to change what they mean by hardship because the way it's written out they just talk about financial hardship and they make it extremely difficult to jump through the hoops to get money," Stubbs told The AM Show.
"I think you have to start talking about a wider definition of hardship, and we've clearly seen a case of that here."
Stubbs said it currently took between two and five weeks to process a hardship claim. Applicants were also subject to a "crazy amount of intrusion" into their lives to verify the claim.
He said the process needed to change to include to not just focus on financial hardship but to also include emotional hardship - "they should loosen up".
An estimated $500 million will be made in Kiwisaver fees this year, Stubbs said. He suggested some of that money could be used to help process hardship applications.
"They can carve out some of that money and use that to fund a service which is quick and simple and takes away all of the optional grief of people getting access to their own money - it's crazy."
Minister of Finance and Commerce and Consumer Affairs Kris Faafoi told Newshub he had "a huge amount of sympathy" for the family.
"KiwiSaver is primarily a retirement savings scheme so the bar has been set reasonably high for people to withdraw their money early," he said.
"However, there are situations in which people should be able to access their KiwiSaver savings."
He said the law requires providers to be "reasonably satisfied" that the grounds for significant hardship had been met, though it was up to individual KiwiSaver providers to interpret that as they saw fit.
"I understand that KiwiSaver providers have worked together in the past to produce some common guidelines that they use in processing these applications. I intend to raise this issue with KiwiSaver providers and whether, for example, those guidelines need to be looked at again to ensure applications like Teresa's are being handled appropriately."
