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Banks cut cash PIEs to half OCR

Low interest rates on offer from the four main banks’ cash PIE funds are likely just an indication of the tough times for people surviving on money in the bank, one commentator says.

Tuesday, 9 February 2016

by Susan Edmunds

The rates for the on-call funds have come down this month to as little as 1.25% for ANZ and BNZ. ASB is offering 1.4% through to 1.5% for those with more to invest and Westpac offers 1.5%.

But RaboDirect is offering 2.25% and Kiwibank will match that with its bonus rate.

The PIE structure caps the rate of tax paid at 28%, which means those who have a personal tax rate of 30% or more get a better equivalent return from the fund than they would in a non-PIE vehicle paying the same rate of interest.

Claire Matthews said many investors who needed their money available at short notice were struggling in the current rate environment and had limited options.

“It reflects the fact that interest rates generally have come back a lot. It’s a good reminder that while there’s a lot of emphasis on how great low interest rates are for borrowers they are not so great for people with funds on deposit, who are actually more numerous,” she said.

“When you’re talking about people who are retired and relying on this to top up their NZ Super it can make a substantial difference to their lifestyle.”

Better returns are available in term deposits, but that ties money up for a set period, or by taking more risk in an investment fund. “Are they comfortable putting it in an investment fund where they have to take on a higher risk or a term deposit where they don’t have access? It’s difficult.”

Matthews said it was still possible that rates could drop further.

An ANZ spokeswoman said rates could change any time and there was the potential that other banks could match ANZ and BNZ’s move, which happened on February 1.

A Westpac spokesperson said the cash PIE fund had benefits.  The bank also offers an Online Bonus Saver PIE with a 3.05% interest rate available, with different conditions.

“[It] can offer effective returns for higher tax payers (tax is capped at 28%), but also provides immediate and easy access for customers to transfer surplus funds to on a short term basis. Westpac has multiple products to suit different customer needs, and price may only be one of the features and benefits. We work with our customers to review all these features and benefits when deciding on the best products for their investment needs.”

 

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Cash PIE Rates
Institution Rate 30% 33%
ANZ 0.10 0.10 0.11
ASB Bank 0.40 0.41 0.42
ASB Bank 0.55 0.59 0.56
ASB Bank 0.60 0.61 0.64
ASB Bank 0.65 0.66 0.69
ASB Bank 0.70 0.72 0.75
BNZ 0.10 0.10 0.10
Heartland Bank 2.25 2.59 2.70
Kiwibank 0.75 0.77 0.88
Kiwibank 1.75 1.81 1.89
Nelson Building Society 3.75 3.90 4.08
RaboDirect 1.00 1.02 1.07
SBS Bank 1.80 1.86 1.94
TSB Bank 1.60 1.64 1.71
Westpac 0.35 0.36 0.38
Westpac 0.10 0.10 0.11
Westpac 2.10 2.16 2.26

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