Our monitoring of bonus saver interest rates shows that banks have dropped their offers faster than the underlying benchmarks

If you use a bonus saver account you will have noted relentless reductions in the interest rates offered.

This is no different to the rate direction for home loans and term deposits.

But with any savings account, the bank has the option to reduce what you receive with only minimal notice. With term deposits (and home loans) you can fix the term and avoid instant reductions (or rises).

But bonus savings accounts have some nice features, especially the ready access to funds without incurring an interest penalty (although you may not qualify for much interest in the month you draw the account down).

So a key consideration is how the institution maintains its rate attractiveness over time.

We have previously reported that RaboDirect has scored best on that basis, and that is still true.

But this time, we want to point out that these rates are falling faster than the underlying benchmark rates.

Back in April 2014 the average bonus saver rate offered was 4.00% and the best offered was 4.25% when the OCR was 3.00%. That is a +1.00% to +1.25% of a 'premium'.

In August 2015 that had steadily diminished to +0.60% and +0.90%.

Today that 'premium' is down to +0.50% and +0.75%, levels that are just half what they were 18 months ago.

Banks are not competing as hard for bonus saver money, probably relying on the embedded balances hanging around, and that allows them to extract extra profit from them.

It is a hard thing for savers to notice.

When assessing the most advantageous bonus saver for you, the track record of the rate is what you should assess, rather than just today's rate. When banks put on the squeeze, you are the one paying for it.

And we recommend you always look at term deposit, PIE or savings account returns on an after-tax basis and the best way to do that is to use our deposit calculator. This won't change the relative comparisons, but it will get you to focus realistically on what net earnings you will receive. When rates sink, 'surprises' hurt more than usual.

Here are the current bonus saver rates on offer by banks today:

(These rates are taken from our comparison page here.)

Bonus savers compared Minimum
Balance
Apr-14 Dec-14 Aug-15 Sep-15 Jan-16
January 26, 2016
    req'd % % % % %
               
ANZ Serious Saver $1 4.00 4.25 3.75 3.75 3.20
ASB Savings Plus $1 4.25 4.25 3.65 3.40 3.15
BNZ Rapid Save $1 4.00 4.10 3.65 3.40 3.00
Kiwibank On-line Call* $2,000 3.00 3.15 2.75 2.50 2.25
Westpac Online bonus $1 4.00 4.30 3.60 3.35 3.05
               
Co-operative Bank Step Saver $1 4.25 4.40 3.70 3.45 3.10
RaboDirect Premium Saver $1 4.20 4.55 3.90 3.50 3.25
SBS Bank Incentive Saver $1 4.20 4.25 3.75 3.75 3.25
               
RBNZ OCR   3.00 3.50 3.00 2.75 2.50

* Kiwibank also offers a Notice Saver account where you can earn 2.75% if you give them at least 32 days notice to withdraw and 3.20% if you give them 90 days notice to withdraw. Kiwibank Notice Saver accounts require a minimum balance of $2,000 for these rates to become effective.

[This story is an update of an earlier one published on September 27, 2015.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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43 Comments

Are these actions consistent with the ethos of banks dedicated to the long term needs of the citizens?

Depositors are getting the return they deserve SH.

You don't see us PIs moaning do you?

People still have savings these days?

Yes - those realising capital gains in the property market - currently recognised by the RBNZ at around $146 billion - they would be gutted if they were extinguished. by the stroke of a civil servant's pen.

Extremely high risk keeping that money in a bank. During a bank collapse all that money would disappear.

and where would be safe? that is the Q.

I pulled out 100% of savings and put 50% in term deposits and 50% in 6+% dividend yielding shares.
These bonus acc are looking dreadful atm.

Which equities are those? Please feel free to share.

TIme is up for savers: The OCR is only going to drop further until we too reach zero. IF wanting a monetary correction you will have to force one by taking out at least ONE bank via an on mass withdrawal, best starting with an Aussie worst performing most at risk bank like ANZ or Westpac.

The RBNZ can never raise interest rates without killing the property bubble. They have put themselves in a rock and hard place, only serving the interests of the most in debt individuals to thus protect the banks who they also serve from a default position.

The economy is going nowhere under this post 2008 sham. So, some very hard choices are needed to be made. Join the ponzi scheme and add to the private debt bubble, or...... get the hell out before the whole thing comes crashing down and what if any savings and investments are used to re-inflate it!
One thing is sure they will not be calling in the mortgage holders

Up to you. The government and RBNZ have chosen who they are backing and it ain't the cash rich.
Withdraw all and everything, get some gold or silver, buy a good safe and start a debt collection agency! ;-)

Nicely put

Maybe forget about the silver part... otherwise quite correct! And if you ever get the chance to ask an honest and reputable gold bullion dealer, they will confirm that you wouldn't be alone in doing just that. I certainly have opted out of the banking ponzi scheme almost completely, except for short term (3-6 months living costs) needed fiat paper. I sleep quite soundly these days...

Or open a (government guaranteed) bank account in Oz and put your cash there.

Except you are not an Australian citizen, so if it comes to it its your money they will take first.

Can somebody answer a question from a non-economist pensioner (me) who is becoming alarmed by all this talk of an economic collapse. We have a sizeable term deposit maturing in March next year. We have other investments plus a mortgage free home. Our net wealth is not great, (don't live North of the Bombays) and draw down on some capital to augment our super. So the question is this, if the monetary system collapses as some commentators on here are predicting, and the OBR kicks in, what happens to those with mortgages owing to the banks after they take the savers money. Do those with mortgages just walk away owing no debt to the banks, I,e, the debt is forgiven but they retain their homes as nobody will be able to buy them. There are many other questions in my somewhat muddled brain, I.e. If you have money stashed under the mattress what is that worth as obviously the banking system is gone. Do we all revert to the green dollar, if so I have a good garden and there are cattle in fields not far away lol. I also have some shiny jewellery! Just asking.

I dont think the monetary system will go. That would imply a mad max world that would be way to extreme and unlikely. Now a similar event to the 1930s Great Depression, yes. You could look up Steve Keen on that.

I would suggest you take professional advice along the lines of how do I protect my capital in the event of a serious crisis. About the only 'safe" thing to my mind is short term Govn bonds, ie 6 or 12 months, but that is for a professional to advise you on.

"what happens to those with mortgages owing to the banks after they take the savers money" No, the debt remains. I would expect those mortgages get sold so that some money can be realized. I would assume by then however that 20% or more of mortgages would be under water, hence the OBR.

A good garden is well worth it.

Thank you Steven, commonsense all around. We do have a very good financial man who I am intending to put that question to but it's good to hear comments. Commonsense tells me that a calamity collapse would be just catastrophic but I'm old enough to remember 1987, 1990, 2000, 2007 etc and also remember stories from my grandparents of the Great Depression. Thanks once again.

" remember stories from my grandparents of the Great Depression" exactly. A lesson a lot of ppl will learn inside a decade I think.

Under the banking regulations the deposits are capital that will be absorbed along with the bank's own capital reserves. A house price collapse of 30% would place banks at serious risk.

Government bonds are safer than a bank deposit. It is possible to invest in the stock market via indexs but in the event of a collapse the stock prices will tank and this is not a good option for retirees.

People have forgotten or never experienced 1987. People seem oblivious to the warning signs. I'm just waiting for people who never invest to start flocking into the property market, and others to start talking about new economics (like the 1920's).

People wonder why the Chinese stock market is collapsing. Just to give you a hint 5% of the investors in China are illiterate.

Are NZ Government bonds guaranteed?

No, nothing is guaranteed. However consider who is least likely to default, short term at least.

we are holding our savings in the bank as we are watching the Auckland property market and praying for it to calm down so we can buy a place where we intend on living with the kids at least till they are on their own to feet (probably 20 years) not looking for a financial gain or ever moving again just want a home. I think we will join the sheep and just do it,trying to hold out but don't want to loose our hard earned cash if it does go belly up. There just doesn't seem to be any other choice. Rastus had good advice on the Australian guarented deposits but it still doesn't seem safe. Who is a good financial planning company? Had the worst advice ever in 2012......dont buy its about to crash.... gutted

Bless....Maybe look for a place that has fresh water, place you can make a shelter,place you can produce the necessary sustainables . And maybe meet your family. Kid's are random things. :)

Every week you wait for the housing to go down (which it wont) houses are appreciating by $1500 a week, so good luck with that strategy...

I thought the REINZ figures showed Auckland prices had dropped 6 percent since October. These are the figures you have to pay the REINZ for, not the median figures they give out free to Joe Public. My niece in Auckland has had a prime property on the market for two months now. It is approved for subdivision into multiple lots with harbor views. No takers yet. Time will tell. Selling of course as a slave for the Bank.

Thanks keywest im not waiting for it to go down, we grew sick of going through the process only to be outbid on the day. Most of the property's in our reach have come off auction so I guess I will wait a bit longer, probably wait until May. I will let you know how we get on

I would suggest to educate yourself. Learn what the difference between 'Saving' and 'Investing' really means! It is not really as complex as most people pretend it to be. Don't rely too much on other people's opinion as to what is best for storing your wealth. A centuries old jewish rule... 1/3 in property, 1/3 in cash, 1/3 in gold. All physical and as little paper (now digital) wealth as necessary. Be prepared to loose 2/3 of it and still comfortably survive when that happens, because most other people will be worse off IF that happens. For the record, I am not remotely jewish.

Cheers Chris, getting the safe sorted this week

Thanks for this David. In the case of ASB, the bonus saver account interest rate is slightly less than term deposits without the benefit of "locking in." The b'starts don't do a particularly good job with transparency for savers. We're more a nuisance than anything else.

Yes, nothing more than an extinguishable ledger liability in the final analysis - RBNZ/OBR saw to that.

and so it should be, ie the debt should not be transferred to the tax payer.

but it will be, South Canterbury Finance should never have been allowed in but the politicians wanted it in, why votes and friends and family
same with the banks I would put money on it in the event of an OBR the government of the day will under write depositors to a certain amount
then they will be looking for someone to blame and punish and it wont be the banks or depositors or home occupiers

Fair point....however I think this will get as bad as the Great Depression and the Govn will have no choice but to not bailout. A "certain amount" I dont have a issue with say $100k, but the financial parasites hiding millions? that I have a huge issue with.

interesting I was also thinking 100K, the very rich will have their money offshore, I'm sure there will be a wink and a nod to give them time

I am sure...

Some tax-payers have deposits. We all might get a get a trim.Some twice

I always wondered if the OBR is just hot air from central planners. Surely a bail-in would be catastrophically deflationary, and no government or bank would want that. Perhaps the real intention of the OBR is to prevent cash hording in this deflationary world by threatening people with confiscation and negative interest rates. Perhaps we’ll look back in 20 years time and say “wow 2016 was the time to get into cash”, just like we look back now and say “wow 1996 was the time to buy property”.

Privatize the gains, socialise the losses.

nothing catastrophic is going to happen. They have learnt how to cook us slowly like the famous frogs.

I think credit union offers a similar rate to theses guys if not better,last time I checked. credit union also don't have gimmicks were you have to top up by X every month to get the premium rate!

Regarding guarantees for deposits is this something in the t&cs or is there a general rule of say up to 100 is guaranteed if there was a run on the banks? There would or should surely be something.

Not sure the difference between credit union and banks regarding such a guarantee.

Can anyone advise.

To anyone that can't afford in Auckland should buy in regions and rent in Auckland. at least then you are in the game.

a very good option as it maximises the tax laws,

Dead right! Paying tax is for suckers.

3.4% at credit union beats all as far as I can tell, but no mention of it here... beats rabo 3.25% with conditions...

https://www.firstcreditunion.co.nz/Saving/Online-Savings