Comparing High‑Interest Savings and Term Deposit Rates in New Zealand 2025

What “high interest” really means in 2025

Headline rates are only the starting point — they don’t tell the whole story. In 2025, a number of longer‑term term deposits at major banks are advertised just over 4% pa, while some on‑call savings products post competitive gross rates yet allow full daily access. Effective returns, however, depend on compounding frequency, tax treatment and early withdrawal rules. Knowing these variables lets you compare options on an equal footing.

Main product types and how they trade off returns vs access

• On‑call (no notice) accounts
• Provide immediate access to funds with interest accruing each day.
• Suit emergency funds or cash you need regularly.

• In 2025, certain specialist on‑call accounts have delivered materially higher rates than standard everyday accounts while maintaining liquidity.

• Notice saver accounts
• Require advance notice (commonly 32–90 days) before withdrawals.
• Sit between fully liquid accounts and fixed term deposits on the liquidity/yield continuum.

• Typically offer higher rates than no‑notice accounts, varying by the required notice period.

• Term deposits (fixed‑term)
• Lock money away for a set period (from roughly 30 days up to five years).
• Generally pay more for longer terms; very short terms usually return less than longer ones.
• Withdrawing early normally reduces or eliminates interest earned.

Current market snapshot (what to expect in 2025)

• Term deposits: For longer terms, term deposits remain among the highest straightforward risk‑free returns in the deposit market, with some major bank offerings slightly above 4% for multi‑year terms in 2025. Shorter terms pay noticeably less.
• On‑call alternatives: Select on‑call accounts have been competitive in 2025; for example, a named on‑call product offered a gross rate around 3.25% (as of mid‑April 2025) with daily liquidity and monthly pay‑outs.
• Notice saver accounts: Providers have tended to price notice saver rates between on‑call and fixed‑term levels, with typical ranges depending on the notice length.

Note: These figures and examples reflect conditions observed in 2025 and are included to show where products sit in the market rather than to endorse any specific provider.

How compounding and payment frequency affect effective return

Advertised rates may be shown as “interest at maturity” or as simple annual rates. Two main factors alter what you actually receive:

• Compounding frequency: Daily or monthly compounding raises the effective annual yield compared with interest paid only at maturity.
• Payment timing: Interest paid monthly or quarterly can be reinvested sooner, improving effective returns versus a lump sum paid at maturity.

Practical tip: Request the effective annual rate (EAR) from providers or use an online calculator to compare yields on a like‑for‑like basis.

Tax treatment and product structure

• PIEs (Portfolio Investment Entities): Some savings products are structured as PIEs, which can reduce tax on returns for many savers depending on their circumstances. PIE tax treatment can materially change after‑tax yields.
• Personal tax: Interest earned outside PIEs is generally taxed at your marginal rate. When comparing products, model after‑tax returns for your tax bracket rather than relying only on headline gross rates.

Access rules, penalties and practical considerations

• Early withdrawal penalties: Term deposits typically reduce or forfeit interest if you withdraw before maturity. Notice saver accounts usually permit withdrawal after the notice period without penalty.
• Minimum deposits and fees: Many term deposits and some higher‑rate savings products impose minimum deposit requirements (commonly a low‑thousand amount) and may carry account fees or conditions. Confirm these before committing funds.
• Discretionary rates: Banks sometimes offer higher discretionary rates for larger balances or special arrangements; check whether a quoted rate is standard or discretionary and how long it applies.

Safety and deposit protection (important 2025 update)

From 1 July 2025 New Zealand’s Deposit Compensation Scheme became active for eligible deposits at participating banks and authorised non‑bank financial institutions. Key points to check:

• Coverage: Confirm whether your provider and specific product are eligible and what the insured limit is for each depositor and account type.
• Conditions and exclusions: Some investment products or non‑deposit assets may not be covered. Read scheme rules and provider disclosures carefully.

Before placing large sums, verify coverage and any applicable caps or exclusions with the provider.

Practical checklist for comparing accounts and term deposits

• Compare effective yields (EAR), not just headline rates.
• Confirm compounding frequency and interest payment dates.
• Check whether the product is PIE‑structured and model after‑tax yields.
• Ask about minimum balances, fees, and whether rates are discretionary or promotional.
• Understand access rules and early‑withdrawal consequences.
• Verify eligibility and limits under the Deposit Compensation Scheme.
• Consider diversifying across account types and term lengths to balance liquidity with returns.

Which product suits different needs

• If you need full daily access and value liquidity: look at competitive on‑call accounts with daily withdrawals and monthly interest pay‑outs.
• If you can plan withdrawals and want better returns than a standard savings account: notice saver accounts with a defined notice period are a reasonable middle ground.
• If you can lock funds away for months or years: term deposits typically deliver the highest straightforward returns, with longer terms generally paying more.

Always factor in tax, compounding, access rules and deposit insurance before deciding.

Scenario planning and diversification

• Laddering term deposits: Stagger maturities across multiple terms to create regular access points while capturing higher rates on longer terms.
• Mix account types: Keep an emergency fund in a liquid on‑call account, use notice saver accounts for planned expenses, and allocate surplus funds to term deposits to boost yields.
• Revisit decisions: Rates and protection arrangements change; review allocations periodically, particularly around regulatory or market events such as the 2025 deposit protection update.

Final considerations

Comparing high‑interest savings and term deposits in New Zealand in 2025 means looking beyond simple headline rates. Assess effective yield, tax treatment, access constraints, minimums and deposit protection. Use a structured checklist and consider diversifying across product types and maturities to align returns with your cash‑flow needs and risk tolerance.

Sources

• Canstar – Best term deposit rates and market commentary: https://www.canstar.co.nz/term-deposits/best-term-deposit-rates/
• Canstar – High‑interest savings accounts overview: https://www.canstar.co.nz/savings-accounts/best-high-interest-savings-accounts-in-new-zealand/

Disclaimer: Prices, rates and product availability may vary by region, dealer, and current promotions; readers should verify specific rates, terms and coverage with local providers or dealers. Disclaimer: Any promotional offers or incentives mentioned in market commentary are subject to change, may vary by location, and are governed by provider terms and conditions.