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

What “high interest” actually means in 2025

Headline interest rates are only the starting point — not the full picture. In 2025, several longer‑term term deposits at major banks are being advertised just above 4% per annum, while some on‑call savings options are offering competitive gross rates alongside daily access. However, the effective return you receive depends on compounding frequency, tax treatment and early withdrawal rules. 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 your funds with interest accruing daily.
• Well suited to emergency savings or money you need to reach often.

• In 2025, a few specialist on‑call accounts have offered materially higher rates than standard everyday accounts while retaining full liquidity.

• Notice saver accounts
• Require advance notice (commonly 32–90 days) before withdrawals.
• Occupy the middle ground between fully liquid accounts and fixed term deposits on the liquidity‑vs‑yield spectrum.

• Typically deliver better rates than no‑notice accounts, with rates generally increasing for longer notice periods.

• Term deposits (fixed‑term)
• Lock funds for a set term (from around 30 days up to five years).
• Usually pay higher rates the longer the term; very short terms yield noticeably less than longer ones.
• Withdrawing early generally reduces or cancels interest payments.

Current market snapshot (what to expect in 2025)

• Term deposits: Longer terms represent some of the highest straightforward risk‑free returns in the deposit market, with certain multi‑year offerings from major banks slightly above 4% in 2025. Shorter term options pay significantly 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) while providing daily liquidity and monthly pay‑outs.
• Notice saver accounts: Providers have typically positioned notice saver rates between on‑call and fixed‑term levels, with exact ranges depending on the length of the notice period.

Note: These figures and examples reflect conditions observed in 2025 and are intended to illustrate how products are positioned, not to endorse any particular provider.

How compounding and payment frequency affect effective return

Advertised rates may be shown as “interest at maturity” or as simple annual figures. Two important factors change 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, boosting effective returns versus 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 lower tax on returns for many savers depending on their tax profile. PIE treatment can materially affect after‑tax yields.
• Personal tax: Interest earned outside PIE structures is typically taxed at your marginal rate. When comparing options, model after‑tax returns for your tax bracket instead of relying only on headline gross rates.

Access rules, penalties and practical considerations

• Early withdrawal penalties: With term deposits, accessing funds before maturity usually results in reduced interest or no interest for the time the funds were held. Notice saver accounts normally permit withdrawal once the notice period ends without penalty.
• Minimum deposits and fees: Many term deposits and some higher‑rate savings products require minimum deposit amounts (often around a low‑thousand figure) and may impose account fees or conditions. Confirm these before committing funds.
• Discretionary rates: Banks sometimes quote higher discretionary rates for larger deposits or special arrangements; always check if 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 substantial 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 to competitive on‑call accounts offering daily withdrawals with monthly interest pay‑outs.
• If you can plan withdrawals and want better returns than a basic savings account: notice saver accounts with defined notice periods are a sensible middle option.
• If you can lock away funds for months or years: term deposits usually deliver the highest straightforward returns, with longer terms tending to pay more.

Always take into account tax, compounding, access rules and deposit insurance when deciding.

Scenario planning and diversification

• Laddering term deposits: Stagger maturities across different terms to create regular access points while capturing higher yields on longer terms.
• Mix account types: Keep an emergency fund in a liquid on‑call account, use notice saver accounts for planned spending, and place surplus funds in term deposits for improved returns.
• Revisit decisions: Rates and protection arrangements change; review your allocations regularly, 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 limitations, minimums and deposit protection. Follow a clear checklist and consider diversifying across product types and maturities so your portfolio fits 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.