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

What “high interest” really means in 2025

Headline rates are a useful starting point but don’t tell the full story. In 2025, a number of multi‑year term deposits at major banks are being advertised a little above 4% per annum, while some on‑call savings accounts are paying competitive gross rates and still allowing daily access. However, the effective return you receive depends on compounding frequency, tax settings and the rules for early withdrawal. Grasping these elements is essential for fair comparisons.

Main product types and how they balance returns vs access

• On‑call (no notice) accounts
• Provide immediate access to funds with interest accruing daily.
• Well suited to emergency savings or money you need to access frequently.

• In 2025, a handful of specialist on‑call accounts have delivered noticeably higher rates than standard everyday accounts while retaining liquidity.

• Notice saver accounts
• Require advance notice (commonly 32–90 days) before you can withdraw.
• Sit between fully liquid accounts and fixed term deposits on the liquidity‑vs‑yield scale.

• Typically pay more than no‑notice accounts, with rates varying by the length of the notice period.

• Term deposits (fixed‑term)
• Lock funds for a defined period (from about 30 days up to five years).
• Tend to offer higher rates the longer the term; very short terms generally pay less than longer ones.
• Early withdrawals usually mean reduced interest or forfeiture of interest for the period held.

Current market snapshot (what to expect in 2025)

• Term deposits: For risk‑free, straightforward returns, longer term deposits are among the most attractive options in 2025, with some major bank offerings slightly above 4% for multi‑year terms. Shorter maturities pay substantially less.
• On‑call alternatives: Certain on‑call accounts have been competitive in 2025; for example, a named on‑call product paid a gross rate around 3.25% (as of mid‑April 2025) while preserving daily access and monthly payouts.
• Notice saver accounts: Rates for notice savers typically sit between on‑call and fixed‑term levels, with actual figures depending on the required notice period.

Note: These examples and figures reflect market conditions observed in 2025 and are intended to illustrate product positioning rather than endorse a particular provider.

How compounding and payment frequency affect effective return

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

• Compounding frequency: Daily or monthly compounding boosts the effective annual yield compared with interest only paid at maturity.
• Payment timing: Interest paid monthly or quarterly allows earlier reinvestment of earnings, improving effective returns versus a lump sum paid at the end.

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 the tax on returns for many savers depending on their income. PIE tax treatment can materially change after‑tax yields.
• Personal tax: Interest received from non‑PIE structures is generally taxed at your marginal rate. When comparing options, 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: With term deposits, taking money out before maturity commonly leads to reduced or no interest for the period the funds were held. Notice saver accounts usually allow withdrawal after the notice period without penalty.
• Minimum deposits and fees: Many term deposits and some higher‑rate savings products require a minimum deposit (often around a low‑thousand amount) and may carry account fees or conditions. Check these before placing funds.
• Discretionary rates: Banks sometimes apply higher discretionary rates for larger deposits or bespoke arrangements; confirm whether a quoted rate is standard or discretionary and how long it will apply.

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 checks include:

• Coverage: Verify whether your provider and the specific product are eligible and what the insured limit is per depositor and account type.
• Conditions and exclusions: Some investment products or non‑deposit assets may be excluded. Read the scheme rules and provider disclosures carefully.

Before committing substantial sums, confirm coverage details and any applicable caps or exclusions with the provider.

Practical checklist for comparing accounts and term deposits

• Compare effective yields (EAR), not only 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 spreading funds across account types and term lengths to balance liquidity with returns.

Which product suits different needs

• Full daily access and maximum liquidity: look to competitive on‑call accounts that allow daily withdrawals and pay interest monthly.
• Planned withdrawals and better returns than a standard savings account: notice saver accounts with a set notice period can be a reasonable compromise.
• Funds you can lock away for months or years: term deposits typically deliver the highest straightforward returns, with longer terms usually paying more.

Always factor in tax, compounding, access constraints and deposit insurance before making a decision.

Scenario planning and diversification

• Laddering term deposits: Stagger maturities across different terms to create regular access points while capturing higher rates on longer terms.
• Mix account types: Keep an emergency buffer in a liquid on‑call account, use notice savers for planned expenses, and put surplus funds into term deposits for better yields.
• Revisit choices: Rates and protection arrangements change; review your allocations periodically, especially around regulatory or market shifts such as the 2025 deposit protection update.

Final considerations

To compare high‑interest savings and term deposits in New Zealand in 2025 you must look beyond headline rates. Assess effective yield, tax treatment, access limits, minimums and deposit protection. Use a systematic checklist and consider diversifying across product types and maturities to align cash‑flow needs with return objectives 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.