Kiwibank's 'no term' deposit

Kiwibank launches 'no term' deposit at 5%

26th Oct 10, 11:27am by Alex Tarrant

Kiwibank has introduced a no-term deposit option for savers which it says could eat into a substantial share of the traditional term deposit market.

The state-owned bank's 'Notice Saver' will allow depositors to withdraw some, or all, of their funds by giving Kiwibank 32 days' notice.

The scheme, for minimum deposits of NZ$2,000, has no fixed term and an interest rate of 5% per annum. Returns will be calculated daily and compounded monthly. It is also compliant with PIE regulations for customers on higher tax rates, Kiwibank said.

See all term deposit rates here.

Here is the release from Kiwibank:

Kiwibank has today launched a new innovative savings option called “Notice Saver” that combines high returns with the flexibility of having access to funds.

Notice Saver is expected to be particularly popular with customers who have money to invest, but are not certain when they will require some or all of the money for other things.

Kiwibank Chief Executive Paul Brock said that Notice Saver is a response to demand from customers who are seeking good returns without compromising flexibility.

If a traditional Term Deposit is broken because the customer has need of funds before the due date, there is a significant reduction in the returns paid.

Money invested in Notice Saver is not fixed for a set term and returns are calculated daily and compounded monthly. Notice Saver is also compliant with the PIE regulations which means there are tax advantages to customers on higher tax rates.

It will allow customers to enjoy returns normally only enjoyed for fixed term investments and withdraw some or all of the funds by giving the bank 32 days’ notice.

Mr Brock said it is another initiative to assist people with savings.

“Notice” accounts are available in the US, England and South Africa. Mr Brock said these savings options are very popular for customers seeking higher returns, and access to funds without losing interest and flexibility. The compounding returns paid monthly also prove attractive.

Mr Brock said that these types of savings options have been long overdue in New Zealand and could take a substantial share of the traditional Term Deposit market because of their flexibility.

The current return available for Notice Saver is 5.00% p.a. There are no account management or transaction fees. The minimum deposit is $2000.

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44 Comments

by Nicholas Arrand | 26th Oct 10, 3:33pm 1288060417

So why is Kiwibank quoting rates on your Savings Page for anything less than 5% with a maturity longer than 32 days? Of course! Once we're in, they will drop the rate.......It's a 32 day 'term deposit' rate, that's all.

by Rob | 26th Oct 10, 3:54pm 1288061675

It says "No set term", but then says 'withdraw money by giving 32 days' notice', so surely it is a 32 day (1 month) minimum term.

Really it is just a online call account, which you have a 32 day minimum term on, in order to withdraw your money

Still, not bad compared to other banks.

by Nicholas Arrand | 26th Oct 10, 4:42pm 1288064569

...and does Kiwibank give you 32 days notice of a rate change? ie: are funds deposited today 'fixed' for a minimum 32 days @ 5%? If not, it's a less than useless tool that give you 5%, today for the privilige of being locked in for another 31 days at whatever rate Kiwibank deem payable, tomorrow. ( I assume they also have a penalty for early withdrawal, like....zero % ?)

by Bullitt | 26th Oct 10, 7:57pm 1288076261

It says they will consider withdrawls with less/no notice under exceptional circumstances only so I'd guess itll be at zero interest or a big fee similar.

I dont get the advantage. If you need your money straight away put it in an online call account and get less interest but can get it out the same day. If you dont need your money for a longer period put it in a term deposit and get higher rates.

Till they match the term deposits and with enough certainty theyll stay that way I dont see the point.

by We Are Stuffed | 26th Oct 10, 11:20pm 1288088430

Perfect for our house sale funds this Friday.

by ADRIAN N | 26th Oct 10, 11:24pm 1288088640

An online call acct won't give you 5% p.a. compounding monthly + that is PIE compliant.

There is an "interest adjustment" if it is broken before the 32 days notice -this is forfeiting the prev month interest earnt. Unless you haven't had the Notice Saver for a full month.

This isn't an account for if you need money straight away - what this is is a great savings rate account which is a slightly better rate than TD's given the compounding nature.

by Taxman | 27th Oct 10, 9:49am 1288126189

How exactly is it better than most TD's? Given that most can compund monthly as well

by ADRIAN N | 27th Oct 10, 12:13pm 1288134815

The vast majority of TD investors have interest at maturity because that's all they can get. The 32 day notice account gives compounding interest to everyone.

by Nicholas Arrand | 27th Oct 10, 12:20pm 1288135240

Lets' say you're swamped with funds today. Tomorrow you drop your rate to 2.5% because you don't need more that the squillion you take in today. What rate do you pay for funds deposited today, tomorrow? 5% or 2.5% for the next 31 days if I then give notice?

by ADRIAN N | 27th Oct 10, 12:39pm 1288136340

It would kill the product if the interest rates were changed dramatically.

The Online Call accounts interest rates are exactly the same - they can change at any time. They have changed once in the last two years

by Nicholas Arrand | 27th Oct 10, 1:08pm 1288138102

So your answer is 'tomorrow's rate will be applicable for the last 31 days of the run " ~ the notice period. That's worse interest rate protection than a one month Term Deposit rate OR a Call Account ,where movement is possible without notice.The bank gets to choose its interest rate, and the customer is locked in regardless of the new rate !!! NB: My example was an illustration, but the principle obviously applies.

by ADRIAN N | 27th Oct 10, 3:58pm 1288148287

Yes the rates can change

by We Are Stuffed | 27th Oct 10, 12:43pm 1288136587

Where else can you get a 5% return on a month deposit???

Kiwibank wont drop the rate straight away. It is a new product and they obviously want it to fly.

Better than 3.75 on call. I doubt that they would drop it to that in one go.

I have been getting 4.8% at TSB in a pie (about 4.95% at composite tax rates) for a while.

Now Kiwibank will be getting some of my funds.

by ADRIAN N | 27th Oct 10, 12:48pm 1288136884

Good choice :-)

by Father Ted | 27th Oct 10, 9:12pm 1288167138

What weed are you smoking at Kiwibank??? At least 3 banks (ANZ, NBNZ, ASB) give you monthly income on their term deposits without fleecing you on the rate. Just about every savings account is effectively monthly compounding because it pays interest every month. You're clutching at straws to justify your bright shiny new lemon.

Interesting that Kiwibank only recently changed to a 2 tier price card for terms of 1 year plus if you want interim interest. Kiwibank put in a much lower carded rate for interim interest, thereby fleecing customers who want that option. It was clearly laying the groundwork for this new product. So the comment "The vast majority of TD investors have interest at maturity because that's all they can get" is clearly a myopic Kiwibank view of the world as they would like it to be. The reality is quite different.

Banks are like magicians - showing you one hand while the others doing all the trickery.

by ADRIAN N | 26th Oct 10, 11:25pm 1288088718

Yep- i work for KB

by Bullitt | 27th Oct 10, 5:35pm 1288154116

I currently have a number of term deposits on different maturities so pretty much one rolls over each month anyway. At some point I will take them all out and put them into a house deposit but it wont be for at least a year probably longer. Each of these pays a higher rate than this product offers, admitedly the monthly compounding pegs it back a bit but its still less than for example your current 5.15% for 120 days at maturity.

Maybe when I'm less than 6 months away from buying a house I would roll them into this as they mature but likely ill still get more putting it in a 90 day term deposit etc. Other than for very brief periods such as that what customers do you expect to attract from more standard offerings?

by Father Ted | 27th Oct 10, 9:22pm 1288167741

Why would you even consider this product? It's a total have. You'd be much better off in a term deposit as long as you negotiate on rate - which Kiwibank don't do.

Why would anyone ever want this product? A customer either wants funds on call, or they want to lock them away for a fixed term at a fixed rate. This product provides neither of these customer requirements.

Sounds like a giant marketing scam to me.

Instead of playing around with smoke and mirrors, why don't Kiwibank simply pay a decent rate on their existing Call products. If you can do it on this new product, why not on existing products. If you're going to tell us its the 32 day notice period, then please explain in detail how that works.

Also, can Kiwibank tell us the final margin over the Call rate that this account will settle at? What plans do you have to introduce differing notice periods. Your investment statement makes it very clear that you plan to make changes on this product in the future. Best to be upfront with customers now - we don't like being shafted.

by tristanb | 28th Oct 10, 11:57am 1288220256

Predictably some people are opposed to this just because it is Kiwibank, and they have some sort of ideology about government ownership of assets being 'wrong'. I think it's a good idea, and have stuck in $2500 to see how it works.

It's obviously essentially a 32-day term deposit, but you're not going to get rates as good as that with a bank unless you're prepared to lock your money away for 6 months.

I have about 50% of my savings in online call accounts. I keep it there in case I ever need it. But I cannot envisage a situation where I'd require all the money instantly, and 32 days seems more than enough notice. (Enough to get me through to a credit card due date).

I guess the obvious example is an overseas holiday. Put the cash in the Notice account, get your compounding 5% PA, and when you've finally sorted out a plan, put your tickets on the Mastercard, and request a withdrawal for the fares + some spending money. This shouldn't be hard to do one month in advance.

You'll keep being paid interest on the money you would have spent on airfares, and by the time the credit card statement is due, you'll be able to pay it off easily.

by Nicholas Arrand | 28th Oct 10, 12:04pm 1288220648

It is not 'essentially' a 32 day Term Deposit ! Kiwibank can change the rate...tomorrow...if they wish. Then you are 'locked in' for the next 31 days at whatever rate THEY decide. Not probable, but possible. Take the 5% and enjoy. But it's not what it seems to be, to you.

by tristanb | 28th Oct 10, 12:17pm 1288221452

Point taken re: TD.

But if the rate changes (which is unlikely to be an extreme change) it would take just over a month for me (and others) to move the cash elsewhere. This will be an incentive for KB to keep the rates competitive.

It's obviously not a replacement for all investments, but seems to be a good place to put most of the "safety net" cash that many people stash in online call accounts. (Until the return on online call accounts is increased).

by Nicholas Arrand | 28th Oct 10, 12:25pm 1288221904

The difference on your $2500 between this Kiwbank product and, say, Rabobank Call @ 4% is....$1.75 after tax! Is it worth that 'benefit' for the privilige of locking your funds up for 32 days at some discressionary rate outside of your control?

by tristanb | 28th Oct 10, 12:58pm 1288223913

I'm going to buy an iceblock on a sunny day with that $1.75!

The $2500 is just to see how it goes (you need a minimum of $2000 to earn any interest BTW). I'll probably put more in once I get my first interest payment.

I don't have much control over any interest rate. With a TD you're locked into a relatively low rate if interest rates were to increase. Currency/global markets/OCR are all out of my control, but I've come to accept this!

I'm hanging out for that 1% margin. A month is a pretty short time

by Nicholas Arrand | 28th Oct 10, 1:07pm 1288224444

Conversely, if interests rates fall, with a 'real' Term Deposit you'll be locked in to a relatively higher interest rate. And if interest rates do 'what you have no control over' and rise, you'll still have 31 more days to go at whatever rate Kiwibank deems. Others, on call, can move...the very next day, leaving you licking your lolly at relatively low rates for that notice time......

by tristanb | 28th Oct 10, 3:15pm 1288232152

At the moment that would require the KB rate to drop (or Rabo's to increase) by 1% within 32 days - extremely unlikely and a risk I'm willing to take. Especially as i'd be earning 25% more net interest than with Rabo in the meantime.

Besides, the interest rates between banks are not independent - if Kiwibank was to drop rates by %1, RaboPlus will be doing the same in a week.

by Nicholas Arrand | 28th Oct 10, 3:45pm 1288233901

Okay. Lets' say you are Kiwibank. You have, I don't know- you pick a figure- $100 mio in this new little venture @ 5%. Bernanke lets loose with a trillion dollars of QE next week; interest rates unexpectedly explode as inflationary expectations run riot, and rates go up by your 1% or, whatever %. Do you, as Kiwibank, move your rate of 5%, straight away? Or do you wait a month, knowing you have a hard core $100mio at 5% "locked in" until the notice period expires, then move?

My point is: In whose interest is this 'new' product? If you think it's 'in yours', that's why bankers make so much.

Also you note, ".. interest rates between banks are not independent - if Kiwibank was to drop rates by %1, RaboPlus will be doing the same in a week." So on that basis, what do you expect Rabobank to do now? Stay on 4% or move to 5%?

by tristanb | 28th Oct 10, 4:32pm 1288236765

Rabo's not going to move to 5% unless people like me start moving money to Kiwibank!

Of course it's in the bank's interest to have this new type of account! It doesn't mean it's not a win-win. Kiwibank wins by having a 32 day "time hedge", I win by them having a higher interest rate than otherwise I would get.

They only thing I lose is immediate liquidity, which I don't really need for all my cash, and am more than happy to exchange this for a higher return.

I don't work for Kiwibank, and have no interest in trying to convert people, but I see a definite benefit with little downside (excluding your unlikely extreme interest fluctuation scenarios).

At 5% KB vs 4% Rabo, if I have money with KB for 11 months, and KB drops its rate to 0% for the last month while Rabo stays static on 4%, I'd still be better off with Kiwibank.

But by all means, keep your cash wherever you want. If 32 days is too long to wait after an interest rate change - then don't use it. If 1% above the current highest bank oncall rate isn't enough of an incentive - then don't use it. If you're going to need to withdraw all your cash in an emergency and have it ready within days - then don't use it. None of these things worry me, so I'm tentatively trying this new type of account.

by Father Ted | 28th Oct 10, 8:27pm 1288250821

Hi tristanb. I understand your argument, but haven't you fallen into Kiwibanks trap. You keep saying where can you get a return of 5% - well the answer is everywhere, is just a matter of how long you want to lock your money up for with a guaranteed rate.

If you are not getting 5% for 90 days on a TD at your bank, then move. I'm not talking about the advertised rates, I'm talking about the negotiated rates. Just like retailing, there is a window price and the discount price. You just need to ask for it.

So, you tuck your $2000 odd away at Kiwibank. In about 3 months it's still sitting there - not required. At that point you are regretting not putting it on a TD as you've now missed out on a higher rate, and you can't get it out for 32 days.

What's with the 32 days anyway. How does a delay of 32 days for withdrawal allow a 1% higher rate on the product? The whole product is very smelly.

by steven | 29th Oct 10, 11:44am 1288305894

They could change the rate to say 1% and screw you over, sure, but that would happen once....and Im sure word would get out via sites like this and they and their product would get ridiculed in public....a bit of a PR disaster....all for the opportunity to not pay a bit of interest on one occasion...

Now in terms of having some money in it with a 32 day notice and a pretty good rate, that doesnt look too bad to me.....as someone said worst case your CC carries you over...so as part of a living/investment strategy I can see it having a place.

regards

by Johnm | 28th Oct 10, 12:54pm 1288223683

Is the 5% rate Kiwibank are advertising the base rate or the "effective rate" given its PIE structure? The press advert is not clear...a bit misleading...doesnt even say it is structured as a Managed Fund!

by tristanb | 28th Oct 10, 9:51pm 1288255868

It'll be the "base rate".

As misleading and ridiculous as those "effective rate for 33% taxpayer" ads are, they generally have the little asterisk with the disclaimer. The ones on the noticesaver website are clean.

by tristanb | 28th Oct 10, 10:02pm 1288256536

"So, you tuck your $2000 odd away at Kiwibank. In about 3 months it's still sitting there - not required. At that point you are regretting not putting it on a TD as you've now missed out on a higher rate, and you can't get it out for 32 days."

If I was getting 8% for a 5 year investment and I needed that $2000 (e.g. to fix a car I need for work or whatever) I'd be waiting for a long time at bus stops.

This account seems to offer a good compromise between TD and call accounts.

It's not a replacement for high return TDs if you're in a situation where you're never going to need the money. And it's not a replacement for online call accounts if you're living hand to mouth and can't wait a month for access.

It depends on your situation. I'm still relatively young (not as young as I'd like to be), and with Xmas coming up and potential job change, I wouldn't want to lock my money up for 3 months (your 90 day example).

I don't know how it lets Kiwibank offer a higher rate. It doesn't really matter to me - the return does. I guess for KB it makes the cash slightly more viscous, plus they've got accurate prediction of next month's minimum balance, so that would be a good thing for them. But some of the 1% difference is likely a margin KB are prepared to pay to beat the competion.

by We Are Stuffed | 29th Oct 10, 11:16am 1288304218

this account is obviously not for everyone. I think a few people are unfairly knocking it on this site.

I have just settled my house for just under a million today and have not yet bought a replacement.

We are going to start looking next week. We might find one next week or it could take a few months.

With this account we can get slightly over 5% (being a PIE) and when we find a house we can make a cash offer with settlement in 33 days or so.

I think it is a bloody good account and it has come at the right time for us.

I still have term deposits at 9% for two more years at ASB that I put away 3 years ago.

This notice saver would obviously not suit those savings but for our house money it is perfect.

by fysc_daniel | 1st Nov 10, 4:45pm 1288583143

anyone actually found out from kiwibank website that shows, 0-1999 0%, 2000+ 5%

the one who deposits 2500 in notice saver will give kb a finger when he receives his monthly statement with the interest earned. meaning he only earns interest on $500 on top of the $2000.

compare 4% and 5% means you need to deposit at least 10000 (8000 earning 5%interest), to break even with 10000 earning 4%.

above is just my personal understanding regards to what they show in the website, if someone can confirm the account earns interest on every dollar, please confirm and prove it.

thanks

by tristanb | 2nd Nov 10, 9:26am 1288643214

"anyone actually found out from kiwibank website that shows, 0-1999 0%, 2000+ 5%"

What!? Are you blatantly misrepresenting what the website states? Or do you have problems with reading comprehension? You're just asking for a libel suit with comments like that!

Where does it say you are only given interest for the amount over $2000? From the site: "Minimum investment $2,000". Do I need to explain that further? You might want to resit your English as Second Language classes.

"please confirm and prove it." Do you have Asperger's? Or are you just really arrogant? You are the one who seems to be making false allegations! The burden of proof lies with you.

by Nicholas Arrand | 2nd Nov 10, 9:43am 1288644235

I thought I'd toddle over to the local Kiwibank franchise, yesterday, to see how the new product was going; even thought " Well I'll give it a go like, tristanb, and see what happens". I asked the lady behind the counter if I could make a deposit under the new scheme ( pointing out the glossy green poster behind her, advertising such) and she picked up her 2B5 note book and said" I haven't got any appointment time left for today. Could you come back at 2.30 pm tomorrow". I asked " So can I make a deposit today?" She answered " I haven't got any....."

Well I guess they're not a 'real bank', after all, are they?! Just a post shop.....

by tristanb | 5th Nov 10, 11:14pm 1288952058

I'm glad I helped convert you! (well nearly)

Like Canny, I just joined online. It was available the next time I checked the account (the next day I suppose). Very easy. I guess you need an existing account to do this.

I've already been paid for 5 days of interest for my $2500 in October. It works out as even better than 25% more than Rabo interest because of the PIE taxation. It's great!

I've just changed my Rabo nominated account to Kiwibank. (It was the abominal ANZ, which I will close as soon as I get through the two remaining cheques from 10 years ago). I have transferred about half of my call money from Rabo into this Notice account, and may soon move more.

But, keep your ideology about "real" banks, and keep your money with the Aussie banks. I hear they've put interest rates up! :-D

by Canny | 5th Nov 10, 10:29am 1288906149

As an existing Kiwibank customer I opened an account over the internet. I sucked out my call money at Rabo. Their term deposit of 5.05% for 6months is less than the compounding return at Kiwibank of 5.2% since it compounds monthly rather than paid at maturity. Why would you lock in for six months in a rising interest rate invironment? As March approaches rates will creap up. This account offers the best of both termdeposits high rates and the convenience of access in a month. I can even program it to pay my monthly bills! If Rabo don't increase their 4% rate significantly or their TD's they will lose out. Other banks have better TD's and Kiwi now has the best one month rate. This suits me. They have cornered a niche market and others will copy it soon.

by Nicholas Arrand | 5th Nov 10, 10:48am 1288907337

After I got back from the Kiwbank 'experience' I rang my banker, and she laughed, wildly. I had told her I was off to check out the Kiwibank rates, and it was no suprise to her that I had received the 'welcome' from the post office sales assistant that I did. "A lot of people have the same reaction as you,' she chortled. Now of course, she works for a bank, the opposition to NZ Post, and 'would say' that. But she competed hansomely on rates, and as with anything in life, you get what you pay for. If you want your money in the post office for a better rate; go for it. Me? I'd prefer to have it in a 'real' bank. But Canny is right about competition; enjoy the post office experience if you have to, before the banks take away the need for it.

by Canny | 5th Nov 10, 8:52pm 1288943554

I absolutely hope they do compete Nicholas. Otherwise we let them rip us off. Rabo was far more competitive when it started and now its trump card: its amazing on call rate for as little as 1$ for 4% has some competition as long as you don't need urgent money. I have split mine appropriately. Some on-call in Rabo some in Kiwis new "rolling monthly" for want of a better term and a range of TD's. Recently the banks started to play the go long or we'll screw you trick and now they have been gazumped imo. When you compare payment at maturity with compounding monthly and calculated daily you really have to add about 0.2% to the compounding rate to make a fair comparison. I reckon Kiwis rate is better than any of the so called "real" Banks: you know the ones whose profits help "their" shareholders rather than other Kiwis:) Sometime near March next year rates will move but when? January, February or March. I bet February which means 4 months and you can't get that at 5.2% equivalent so that’s why I'll be shifting my TD's as they mature to Kiwi or whoever is the best. Seriously I gave up on the Real banks and have experienced real service in a range of unreal banks and can say still use some services of the real Banks where Kiwi isn't up to scratch. I must say I hardly ever need to enter a bank any more so personal service is irrelevant to me. It's what I can do on-line that counts as time is too precious. But bargaining is the way to go. Kiwi does reward its customers as well otherwise I go else ware.

by Nicholas Arrand | 5th Nov 10, 9:07pm 1288944461

Rates sure will move before March, Canny, but which way? You think up....I pick an OCR of....0%...then my Term Deposits will be looking good compared with the Kiwibank savings account ( that can change their rate to 0%...tomorrow), and I can do nothing about it, save give notice for 32 days ( with a call accouunt at, say, Rabobank I can move my funds tommorrow if I get that confirmation). Of course, who really knows where rates may go. A Term Deposit gives me a determinable return; Kiwibank give me a potential return of unquantifyable nature. Yet they can change the rate at their will, and I can do nothing about it! As I said, give me a real bank any day....

by Canny | 5th Nov 10, 10:25pm 1288949127

As with any new product it takes quite some time to really be accepted. It would guarantee I would never use it again if they lowered it anytime soon while TD's stay put. I expect others to copy it and create a competitive market. Kiwi would be fools absolutely losing their investor's confidence just as Rabo did with their pathetic TD's a while back. Win win for us as investors. Of course if you have a really large amount to invest and don't need it for at least 6 months TD's are the way to go. But I am very uncertain as to actually how fast we will climb out of this recession so I don't put all my eggs in one time basket. Interest rates lag so when they begin to rise as they started to a few months back it looked more certain. Unemployment rates appear to have dropped. In three months indications will be clearer. I would rather have a proportion of my funds ready and waiting. A 32 day lag is about right as rates take about that time to respond in the TD market. I would not be tempted unless they were 5.5% for 6months or better.

by Canny | 23rd Nov 10, 10:51pm 1290505894

Rabobank have finally responded with a three month 5% TD but that is still not as good as 5 % componded with 32 days notice. One problem with Kiwibank's account is there is no ability to withdraw over a longer notice. A flaw that someone will improve on one hopes.

by Canny | 3rd Dec 10, 5:46pm 1291351560

Rabo have finally responded with a decent Bankarate term deposit. 6% for 25000 but limited to current funds. Locking in at less than 6% seems pointless at present. Good old kiwibank has started some competition and that is to be encouraged. iI will be interesting if Rabo sustains this aggressive TD rate or its a two day wonder?