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 they don’t tell the full story. In 2025 some longer‑term term deposits at major banks are advertised just above 4% per annum, while certain on‑call savings products have offered competitive gross rates while keeping daily access. However, your effective return 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 funds and accrue interest daily.
• Suitable for emergency funds or cash you use frequently.

• In 2025, some specialist on‑call accounts have delivered substantially higher rates than standard everyday accounts while preserving 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 spectrum.

• Tend to pay higher rates than no‑notice accounts, typically varying with the notice duration.

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

Current market snapshot (what to expect in 2025)

• Term deposits: Longer terms are 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 materially 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 generally placed notice saver rates between on‑call and fixed‑term levels, with ranges depending on notice length.

Note: These figures and examples reflect conditions observed in 2025 and are intended to illustrate where products sit in the market 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 simple annual rates. Two factors determine what you actually receive:

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

Actionable 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 lower tax on returns for many savers depending on their income. PIE tax treatment can materially change after‑tax yields.
• Personal tax: Interest earned outside PIE structures is generally taxed at your marginal rate. When comparing products, model after‑tax returns for your tax bracket rather than relying solely on headline gross rates.

Access rules, penalties and practical considerations

• Early withdrawal penalties: For term deposits, withdrawing before maturity commonly results in reduced interest or no interest for the period the funds were held. Notice saver accounts typically permit withdrawal after the notice period without penalty.
• Minimum deposits and fees: Many term deposits and some higher‑rate savings products require minimum deposits (commonly around a low‑thousand amount) and may have account fees or conditions. Confirm these before committing funds.
• Discretionary rates: Banks sometimes offer higher discretionary rates for larger deposits or special arrangements; always 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 sizable 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 prefer liquidity: consider 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 ground.
• If you have funds you can lock away for months or years: term deposits generally provide the highest straightforward returns, with longer terms tending to pay more.

Always weigh 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 schemes change; review your allocations periodically, especially around regulatory or market updates such as the 2025 deposit protection change.

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 methodical 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.