Banks cut cash PIEs to half OCR
Low interest rates on offer from the four main banks’ cash PIE funds are likely 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%.
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 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.
“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.”
Comments from our readers
No comments yet
Sign In to add your comment
Weekly Updates including news and commentary
Today's Best Bank Rates
Today's Top 5 Deposit Rates
Find a Rate
Cash PIE Rates
21 June 2017
6 June 2017
4 May 2017
10 April 2017
12 January 2017
Disclaimer - Every possible effort has been made to keep the information in the tables and on this site as accurate as possible, however, neither the publisher, Tarawera Publishing, nor anyone engaged to compile the rates and this site accept any liability for inaccuracies or any loss suffered as a result. It is strongly advised that readers check loan details with providers. The full terms and conditions of this site can be found here.
© Copyright 1997-2019. Tarawera Publishing Ltd. All Rights Reserved.