Term deposit rates in NZ are climbing again. If you've got savings sitting in the bank, that feels like good news, and partly it is. But once tax and inflation take their share, a 4.5% term deposit can leave you going backwards in real terms.
This piece compares a standard term deposit, a PIE term deposit and a managed fund, using today's numbers. You'll see what you'd actually keep, and how to decide which money belongs where.
Are term deposit rates going up in NZ?
Yes. Reserve Bank figures released on 7 October show the average advertised rate for a new one-year term deposit was 4.02% in September 2026. A year earlier it was 3.78%. Five-year terms rose further, from 4.14% to 4.79% over the same period.
The top rates are higher. On 11 October 2026 the banks' own websites showed SBS Bank at 4.50% for 12 months, though that's a limited-time rate on a redeemable share term investment rather than a standard bank deposit. Rabobank was at 4.15%, BNZ and Kiwibank at 4.05%, and ANZ, ASB and Westpac at 4.00%. For five years, Rabobank showed 5.05% (interest paid annually), ASB 5.00%, and BNZ, Kiwibank and Westpac 4.85%. Opes Partners' roundup of the same date reports the same leaders.
A big part of the reason is the OCR. The Reserve Bank has lifted it twice this year to 2.75%, and its next decision is on 28 October. When the OCR goes up, banks usually pay savers more.
How much do I keep after tax on a term deposit?
Less than the headline rate. Interest on a normal term deposit has resident withholding tax (RWT) taken off before it reaches you. Inland Revenue sets the rates at 10.5%, 17.5%, 30%, 33% or 39%, and the one you use should match your income tax rate. Pick nothing and the bank deducts 33%. Don't give your IRD number and it's 45%.
Here's $100,000 in a 12-month term deposit at 4.50%:
- Interest before tax: $4,500
- Taxed at 33%: $1,485 in tax, so you keep $3,015
- Taxed at 39%: $1,755 in tax, so you keep $2,745
(Illustrative only. Rates and tax depend on your situation.)
How is a PIE term deposit different?
A PIE term deposit works much like a normal one, but it's taxed as a portfolio investment entity. That means your prescribed investor rate (PIR) applies instead of your income tax rate.
Inland Revenue sets the PIR at 10.5%, 17.5% or 28%. If you don't give your provider a rate, the default is 28%. So for anyone on the 30%, 33% or 39% income tax rate, the most you'll pay on PIE income is 28%.
Same $100,000, same 4.50%, taxed at 28%: $1,260 in tax, and you keep $3,240. Compared with the 39% example, that's $495 more in your pocket.
There's a catch. Opes Partners notes PIE term deposits can sometimes pay slightly lower rates or be less flexible. On 11 October the advertised PIE and deposit rates matched at ANZ, ASB, Kiwibank and Westpac, but the products aren't the same thing. Westpac, for example, says its Term PIE Fund investments are not bank deposits and carry investment risks, including possible delays in withdrawals. Compare the after-tax return and the product terms, not just the tax rate.
What does 4.1% inflation do to my savings?
Stats NZ reports annual inflation was 4.1% in the year to the June 2026 quarter. The September quarter figure comes out on 22 October.
Put that next to the examples above. If prices kept rising at 4.1% for a year, $100,000 would need to grow by about $4,100 just to buy the same things. Keeping $3,015 or $3,240 after tax doesn't get there. Your balance goes up, but what it can buy goes down.
That doesn't make term deposits a bad product. It just means they're better at keeping money safe than at growing it.
Is my term deposit protected if the bank fails?
The Reserve Bank's Depositor Compensation Scheme protects eligible deposits up to $100,000 per depositor, per deposit taker. Term deposits, savings accounts and transaction accounts are covered.
Some bank PIE funds that invest only in that bank's debt may be covered too. The Reserve Bank says to check with your bank, which has to publish a list of protected deposits on its website.
Not covered: bonds and other tradable products, KiwiSaver and other managed investment schemes, and foreign currency accounts. If you've got more than $100,000 with one bank, that's worth knowing.
Got a term deposit maturing soon and not sure whether to roll it over? Book a free 15-minute consultation and we'll talk through what the money is for and when you'll need it.
Term deposit vs managed fund: which is better?
It depends on when you need the money. That's really the whole question.
A term deposit gives you a fixed rate and you know exactly what you'll get. Breaking it early can mean a lower rate or a fee, so it suits money with a set date.
A managed fund doesn't promise a return. Its value goes up and down with the markets it invests in, and in a bad year you can be behind. Opes Partners notes returns on fixed interest are generally lower than on managed funds or shares, because lower-risk assets tend to earn less. Higher expected returns come with bigger swings, and nothing is guaranteed. Many managed funds in NZ are PIEs too, so the same 28% cap on tax can apply.
So the useful question isn't "which one is better". It's "which money is this?"
How should I split my savings?
A simple way to think about it is to sort your money by when you'll need it.
Money for emergencies. Keep it easy to reach. An on-call or notice saver may suit better than a locked term deposit.
Money for the next one to three years. A house deposit, a car, school fees. A term deposit or PIE term deposit often fits here, because you know what you'll have and when.
Money you won't touch for five years or more. This is where leaving everything in cash costs you. A diversified managed fund may be worth a look, as long as you can ride out the ups and downs.
Example: a couple in their fifties with $250,000 in the bank might keep $30,000 on call, $70,000 in term deposits for planned spending, and talk to an adviser about the remaining $150,000. Those numbers are illustrative only. The right split depends on your goals, income and how you'd feel watching a balance drop.
What should I check before I roll over my term deposit?
- Is your RWT rate right? A wrong rate can mean a tax bill at the end of the year.
- Would a PIE term deposit leave you more after tax at your rate?
- Is more than $100,000 sitting with one bank?
- When will you actually need this money?
- Is any of it long-term money that's been parked in cash by default?
How we can help
Invicta's advisers can help you work out which part of your savings is short-term and which part is long-term, then look at options for each. That might mean keeping some in term deposits and putting a plan around the rest. We'll explain the trade-offs in plain English, and we review the plan with you over time.
If you've got savings in the bank and you're not sure they're working hard enough,
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General Information Disclaimer
The information in this article is general in nature and is not intended to be personalised financial advice. It does not take into account your individual goals, financial situation, needs, or circumstances.
Any examples, figures, rates, or scenarios are for illustrative purposes only and may change over time.
Before making any financial decision, you should consider whether the information is appropriate for your circumstances and, where appropriate, seek personalised advice from a licensed financial adviser.
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