Term deposit vs PIE in New Zealand: compare what remains after tax

By GrowThenDraw Editorial Team · Updated August 10, 2026 · 11 min read · Editorial policy

A term deposit and a bank term PIE can look almost identical on a rate table but produce different after-tax results. The standard deposit normally has resident withholding tax deducted from interest. A multi-rate PIE uses the investor's prescribed investor rate, which is capped at 28% for resident individuals.

The lower tax ceiling can help a PIE, but it does not erase a weaker gross rate, a fee or a different crediting arrangement. This guide shows a repeatable comparison using rates you supply. It does not rank providers or select a tax rate for you.

Start with two genuinely comparable offers

Use the same opening principal and term. Enter the gross annual rate for the ordinary term deposit and the gross annual return quoted for the term or cash PIE. Check whether each rate assumes interest at maturity, monthly payments or another frequency, because some providers quote a different rate when payment timing changes.

Also check fees, withdrawal restrictions and whether the PIE return is stated before or after fees. GrowThenDraw assumes the two entered percentages are gross before the selected RWT or PIR and does not subtract a separate fee.

Apply RWT to standard-deposit interest

Inland Revenue says an individual with an IRD number may select 10.5%, 17.5%, 30%, 33% or 39% RWT. If no rate is selected, the default is 33%; if no IRD number is supplied, the non-declaration rate is 45%.

RWT is withholding, not a special final tax rate for term deposits. Inland Revenue squares up investment income at the end of the tax year. A rate below the income-tax rate can therefore create tax still to pay, while too much withholding can be credited in the assessment.

Apply PIR to a multi-rate PIE return

For a New Zealand resident individual, the ordinary PIR choices are 10.5%, 17.5% and 28%. Inland Revenue uses taxable income excluding PIE income and total taxable income including PIE income from either of the two prior income years. The 28% rate is the default when the required information is not provided.

Do not infer PIR from this year's salary alone or choose 10.5% because it gives the best calculator result. New residents, transitional residents, non-residents, trusts and other entities can have different treatment. Confirm the rate with Inland Revenue and notify the PIE correctly.

Calculate both after-tax paths

For an at-maturity comparison, gross interest is principal multiplied by the annual rate and the fraction of a year. Tax is gross interest multiplied by RWT for the standard deposit or PIR for the PIE. After-tax interest is gross interest less that tax, and maturity value is principal plus after-tax interest.

For monthly, quarterly or annual crediting, GrowThenDraw repeats the same calculation for each period. If interest is reinvested, the next period starts from the larger balance. If it is paid out, the deposit balance remains the opening principal and the model carries the cash separately without assuming it earns anything.

Worked example: $50,000 for 12 months

Suppose an ordinary term deposit offers 5.00% and the investor uses 33% RWT. Gross interest is $2,500, RWT is $825 and the after-tax maturity value is $51,675.

A term PIE offered at 4.70% with a 28% PIR produces $2,350 gross return, $658 PIE tax and a $51,692 maturity value. The PIE finishes $17 ahead despite its 0.30-percentage-point lower gross rate. That small result is why the full arithmetic matters more than the product label.

The break-even PIE rate is about 4.653% under these assumptions. A PIE offer below that rate would finish behind the 5.00% deposit; an offer above it would finish ahead. Provider rounding can move the last few cents.

Read the DCS limit at deposit-taker level

The Depositor Compensation Scheme protects eligible depositors up to $100,000 per deposit taker across DCS-protected accounts. It is not a separate $100,000 allowance for every account. Existing savings or term deposits with the same deposit taker reduce the available headroom.

Term deposits can be DCS protected when they are on the deposit taker's protected-product list. Some cash and term PIEs may be covered only when they invest solely in debt of that bank and the exact product appears on that list. Managed funds and KiwiSaver schemes are not covered merely because they hold deposits.

Know what the calculator deliberately leaves out

Use the comparison to understand the arithmetic and ask better questions. Confirm the maturity quote, tax rate, protected-product status and contract terms with the provider and the relevant authority before making a decision.

• Actual-day interest conventions and provider cents rounding.
• Fees, early-break adjustments, notice periods and reinvestment at a future rate.
• Financial-arrangements accrual rules, non-resident tax and entity-specific treatment.
• Credit quality, liquidity, inflation and whether a higher return compensates for risk.
• Depositor eligibility, joint ownership, trust arrangements and final DCS compensation.