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

What “high interest” really means in 2025

Headline interest rates are only a starting point — they don’t tell the full story. In 2025, certain longer‑term term deposits at major banks are advertised just above 4% per annum, while some on‑call savings accounts offer competitive gross rates with full daily access. However, effective returns depend on compounding frequency, tax settings and early withdrawal terms. Grasping these elements lets you compare products on a like‑for‑like basis.

Main product types and how they trade off returns vs access

• On‑call (no notice) accounts
• Provide immediate access to funds and accrue interest daily.
• Suitable for emergency savings or cash you need often.

• In 2025, some specialist on‑call accounts paid materially higher rates than typical everyday accounts while retaining 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 vs yield spectrum.

• Typically deliver higher rates than no‑notice accounts, with rates varying by the length of notice.

• Term deposits (fixed‑term)
• Lock funds for a set period (from about 30 days up to five years).
• Generally, longer terms pay higher rates; very short terms usually yield less than longer ones.
• Early withdrawal commonly reduces or eliminates interest earned.

Current market snapshot (what to expect in 2025)

• Term deposits: For multi‑year terms, some major banks offered straightforward risk‑free returns slightly above 4% in 2025 — among the highest in the deposit market. Shorter terms paid materially less.
• On‑call alternatives: Select on‑call accounts were 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 liquidity and monthly pay‑outs.
• Notice saver accounts: Providers tended to position notice saver rates between on‑call and fixed‑term levels, with ranges depending on the notice period.

Note: These examples and figures reflect conditions observed in 2025 and are intended to show product positioning rather than to recommend a specific 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 change 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 lets you reinvest earnings earlier, increasing effective returns compared with a lump sum paid at maturity.

Actionable tip: Request the effective annual rate (EAR) from providers or use an online calculator so you can 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 income. PIE tax treatment can significantly affect after‑tax yields.
• Personal tax: Interest earned outside 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, withdrawing before maturity typically results in reduced interest or no interest for the period the funds were held. Notice saver accounts usually permit withdrawals after the notice period without penalty.
• Minimum deposits and fees: Many term deposits and some higher‑rate savings products have minimum deposit requirements (commonly around a low‑thousand amount) and may carry account fees or conditions. Check these before committing funds.
• Discretionary rates: Banks sometimes offer higher discretionary rates for larger sums or special 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 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 significant 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 prioritise 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 can be a sensible middle option.
• If you have funds you can lock 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 choosing.

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 for improved yields.
• Revisit decisions: Rates and protection arrangements change; review allocations periodically, especially around regulatory or market shifts such as the 2025 deposit protection update.

Final considerations

Comparing high‑interest savings and term deposits in New Zealand in 2025 means looking beyond headline rates. Assess effective yield, tax treatment, access constraints, minimums and deposit protection. Use a systematic checklist and consider diversifying across product types and maturities to match 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.