Term Deposit Rates NZ: Best Rates Compared
The best 1-year term deposit rate in NZ is currently around 4.80% to 5.00%, offered by Heartland Bank and Rabobank (bank websites, February 2026). The major banks are sitting slightly lower at 4.50% to 4.70%. Rates have been easing from their 2024 peaks as the OCR declines, so locking in sooner rather than later could mean a better rate.
Current term deposit rates
All rates are per annum for standard term deposits with interest paid at maturity (or annually for terms over 1 year). Rates as at 28 February 2026 (bank websites). Minimum deposits vary by provider, typically $1,000 to $5,000.
Rates are indicative as at 28 February 2026 (bank websites). These will be updated by the Forge Money rate scraper once live. Confirm with your provider before investing.
Heartland Bank and Rabobank consistently offer higher rates than the big four banks because they compete on price rather than branch networks. SBS, Co-operative Bank, and Kiwibank sit in the middle. The trade-off is that some smaller providers have fewer branch locations and more limited online platforms, though all are regulated NZ-registered banks.
Notice that rates are inverted for longer terms. The 1-year rate is typically the highest, with 18-month and 2-year rates sitting lower. This happens when the market expects interest rates to keep falling. Banks don't want to lock in high rates for longer periods if they believe wholesale rates will be lower by then.
RWT vs PIE: the tax difference that matters
This is the single most important factor most people overlook when choosing a term deposit. The difference between a standard term deposit (taxed via Resident Withholding Tax, or RWT) and a PIE term deposit (taxed at your Prescribed Investor Rate, or PIR) can be worth hundreds of dollars a year.
How RWT works
On a standard term deposit, your interest is taxed at your RWT rate, which matches your marginal income tax rate. For most people earning over $78,100, that's 33%. If you earn over $180,000, your RWT rate is 39% (IRD).
How PIE term deposits work
A PIE (Portfolio Investment Entity) term deposit is a term deposit wrapped in a fund structure. Instead of RWT, your interest is taxed at your PIR. The key advantage: the maximum PIR is 28%, even if your marginal tax rate is 33% or 39%. Anyone earning over $48,001 in the past two years has a PIR of 28% (IRD).
This means most Kiwis with a marginal tax rate of 33% or 39% get a guaranteed 5% or 11% tax saving by choosing a PIE term deposit instead of a standard one. The gross rate on a PIE term deposit is sometimes slightly lower than the equivalent standard term deposit, but the after-tax return is almost always better for people on 33% or 39% marginal rates.
The after-tax rate is the only rate that matters. On $85,000, a 4.5% term deposit at 33% RWT nets you 3.02%. The same rate in a term PIE at 28% nets you 3.24%. Check your tax rate →
PIE income is not included in your taxable income
There's another benefit. PIE income is excluded from your taxable income for most purposes. It doesn't count towards Working for Families abatement, student loan repayment obligations, or your ACC levy threshold. For some people, this makes PIE term deposits even more attractive (IRD).
Worked example: RWT vs PIR on the same deposit
Scenario: $50,000 invested for 1 year at 4.70% gross.
| Standard TD (33% RWT) | Standard TD (39% RWT) | PIE TD (28% PIR) | |
|---|---|---|---|
| Gross interest | $2,350 | $2,350 | $2,350 |
| Tax | $776 | $917 | $658 |
| After-tax return | $1,575 | $1,434 | $1,692 |
| Effective after-tax rate | 3.15% | 2.87% | 3.38% |
On $50,000, a PIE term deposit returns $118 more per year than a standard term deposit at 33% RWT, and $258 more than one at 39% RWT. That's real money for doing nothing except choosing a different product structure. The difference grows with larger balances.
Not all banks offer PIE term deposits. Check with your provider. Kiwibank, ANZ, ASB, and BNZ all offer PIE options. Some providers call them "PIE term funds" or "cash PIE funds."
How to choose the right term deposit
Term length
Pick a term that matches when you'll need the money. If you're saving for a house deposit in 12 months, a 1-year term makes sense. If you won't need the funds for a while and want certainty, a longer term locks in today's rate.
In a falling rate environment (like now), locking in for longer can protect you from lower rates at renewal. But if rates fall further than expected and then start rising again, you'll be stuck at the lower long-term rate. Some people spread their deposits across multiple terms (for example, one-third in 6 months, one-third in 1 year, one-third in 18 months). This is sometimes called a term deposit ladder. It gives you regular access to maturing funds and spreads your rate risk.
Provider risk
All NZ-registered banks are regulated by the Reserve Bank. There is no government deposit guarantee scheme in NZ (unlike Australia's $250,000 guarantee). However, the Depositor Compensation Scheme (DCS), which started in July 2025, guarantees deposits up to $100,000 per depositor per institution (RBNZ). This covers term deposits, savings accounts, and transaction accounts at licensed deposit takers.
If you have more than $100,000 to invest, consider splitting across multiple institutions to stay within the DCS cap.
Early break penalties
If you break a term deposit before maturity, your bank will typically reduce your interest rate. The penalty varies by provider, but common approaches include paying you a reduced rate (often the on-call savings rate or 2% below your agreed rate, whichever is lower), or charging an early withdrawal fee. Some providers won't allow early breaks at all. Always check the terms before you commit.
Worked example: $50,000 at different rates and terms
This example compares after-tax returns at different rates and term lengths. All calculations assume interest paid at maturity (bank websites, IRD).
At 33% RWT (marginal tax rate 33%)
| Term | Rate | Gross interest | Tax (33%) | After-tax return | Effective rate |
|---|---|---|---|---|---|
| 90 days | 3.65% | $450 | $148 | $301 | 2.45% |
| 6 months | 4.30% | $1,075 | $355 | $720 | 2.88% |
| 1 year | 4.70% | $2,350 | $776 | $1,575 | 3.15% |
| 18 months | 4.50% | $3,375 | $1,114 | $2,261 | 3.02% |
| 2 years | 4.40% | $4,400 | $1,452 | $2,948 | 2.95% |
At 28% PIR (PIE term deposit)
| Term | Rate | Gross interest | Tax (28%) | After-tax return | Effective rate |
|---|---|---|---|---|---|
| 90 days | 3.65% | $450 | $126 | $324 | 2.63% |
| 6 months | 4.30% | $1,075 | $301 | $774 | 3.10% |
| 1 year | 4.70% | $2,350 | $658 | $1,692 | 3.38% |
| 18 months | 4.50% | $3,375 | $945 | $2,430 | 3.24% |
| 2 years | 4.40% | $4,400 | $1,232 | $3,168 | 3.17% |
The 1-year term at 4.70% via PIE gives you an after-tax return of $1,692 on $50,000. The same rate through a standard term deposit at 33% RWT returns $1,575. Over 2 years, the PIE advantage compounds further.
Common questions
What is the best term deposit rate in NZ right now?
The highest standard term deposit rate from a major NZ bank is around 5.00% for a 1-year term from Heartland Bank (bank website, February 2026). Among the big four banks, rates for 1-year terms range from 4.50% to 4.55%. Rabobank and SBS also offer competitive rates above 4.70%. Rates change frequently, so check provider websites for the latest.
Are term deposits safe in NZ?
Term deposits at NZ-registered banks are covered by the Depositor Compensation Scheme (DCS), which guarantees deposits up to $100,000 per depositor per institution (RBNZ). This scheme started in July 2025. Your principal is guaranteed by the bank (you'll get your money back at maturity), and the interest rate is fixed for the term. The main risk is opportunity cost: if rates rise after you lock in, you miss out on the higher rate.
What is the difference between RWT and PIE on a term deposit?
RWT (Resident Withholding Tax) is deducted at your marginal tax rate (up to 39%). A PIE (Portfolio Investment Entity) term deposit is taxed at your PIR (Prescribed Investor Rate), which caps at 28%. If your marginal tax rate is 33% or 39%, a PIE term deposit delivers a higher after-tax return than a standard term deposit at the same gross rate. The difference on $50,000 at 4.70% is $118 per year for someone on 33% RWT vs 28% PIR (IRD).
Can I break a term deposit early?
Usually, yes, but with penalties. Most banks will reduce your interest rate to a lower rate (often the at-call savings rate, currently around 0.50% to 1.50%) if you break early. Some charge a flat fee or apply a rate reduction of 1% to 2% below your agreed rate. A few products don't allow early breaks at all. The exact terms vary by provider, so read the terms and conditions before you invest. If there's any chance you'll need the money early, a shorter term or a notice saver account might suit better.
How often is interest paid on a term deposit?
For terms of 1 year or less, interest is typically paid at maturity (when the term ends). For terms over 1 year, most banks pay interest annually, with the final payment at maturity. Some providers offer monthly or quarterly interest payments, but the rate is usually slightly lower than the at-maturity rate. If you need regular income from your deposit, ask about monthly payment options.
Are online-only banks safe for term deposits?
Yes, provided they are registered as banks with the Reserve Bank of New Zealand. All NZ-registered banks are supervised by the RBNZ and covered by the Depositor Compensation Scheme (up to $100,000 per depositor per institution). Heartland Bank and Rabobank, for example, are both fully registered NZ banks despite having limited or no physical branches (RBNZ). You can check a bank's registration status on the RBNZ website.
How are term deposits taxed?
Interest from a standard term deposit is subject to Resident Withholding Tax (RWT) at your marginal tax rate: 10.5%, 17.5%, 30%, 33%, or 39% depending on your income. You nominate your RWT rate when you open the deposit. If you choose a PIE term deposit, your interest is taxed at your Prescribed Investor Rate (PIR): 10.5%, 17.5%, or 28%. The maximum PIR is 28%, which is lower than the 33% and 39% top RWT rates. You need to tell IRD your correct tax rate. Undertaxed interest will be squared up in your annual tax assessment (IRD).
What happens when my term deposit matures?
Your bank will notify you before maturity (usually 5 to 14 days). You typically have a few options: reinvest for another term (at the current rate, not your old rate), withdraw the funds to your transaction account, or split the amount between reinvestment and withdrawal. If you don't give instructions, most banks automatically reinvest for the same term at the current rate. It's worth checking rates across providers at each maturity date rather than automatically rolling over.
What to do next
- Savings strategies: How to build a savings plan that works
- PAYE calculator: Check your take-home pay and marginal tax rate
- NZ tax brackets: Understand your tax rate and how it affects your returns
- Is my deposit protected?: What the Depositor Compensation Scheme covers (and what it doesn't)
Last updated: 28 March 2026. Sources: Bank websites (anz.co.nz, asb.co.nz, bnz.co.nz, kiwibank.co.nz, westpac.co.nz, heartland.co.nz, rabobank.co.nz, sbs.co.nz, tsb.co.nz, co-operativebank.co.nz), IRD (ird.govt.nz), RBNZ (rbnz.govt.nz). Rates are indicative and subject to change. This is educational content, not financial advice.
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This is educational content, not financial advice.