Kiwibank has criticised bonus interest structures used in many New Zealand savings accounts, arguing that they can leave savers earning far less than advertised rates suggest.
Many products across the market combine a very low base rate with a bonus rate paid only if customers meet monthly conditions, such as limiting withdrawals or increasing balances. Kiwibank argued those rules can reduce returns for households that need to access savings for routine or unexpected costs.
In a comparison provided by Kiwibank, ANZ, ASB and Westpac all offered savings products with base rates of 0.05%, with higher returns dependent on meeting account conditions. BNZ was listed as offering a single 1.70% rate on its Rapid Save account, with one free withdrawal and a GBP £3 fee for each additional withdrawal.
Kiwibank said its own Standard and PIE Online Call accounts pay 1.50% without bonus conditions or penalties, presenting that approach as a simpler model at a time when households face pressure from higher living costs and wider global instability.
Mark Stephen, Kiwibank's chief customer officer for retail, said bonus savings account structures can work against customers whose finances do not fit neatly into monthly account rules. "When life doesn't run exactly to plan, those bonus rates can fall away surprisingly easily," he said.
"A single unexpected expense can mean the bonus disappears for the month, leaving savers earning a very low base rate instead."
Rate gap
The figures cited by the bank show how wide that gap can be. A saver with NZD $20,000 earning 1.5% would receive NZD $300 in annual interest before tax, compared with about NZD $10 at a 0.05% base rate - a difference of roughly NZD $290 over 12 months.
Stephen said pressure on household budgets makes that shortfall more significant. "The conflict in the Middle East is a clear example of how global events can quickly feed into costs here at home. When uncertainty increases, we value predictability. Savings accounts are meant to provide that, but the structure of some products can undermine it."
He argued that the problem lies in product design rather than customer behaviour. "Savers don't miss out on bonus interest because they're careless. They miss out because real life doesn't always align with rigid conditions set by your bank. When savings products rely on people behaving perfectly every month, value naturally shifts away from customers to the banks."
Kiwibank said New Zealand households hold about NZD $86 billion in savings accounts. It estimated that if only half of savers meet the conditions required to earn bonus interest in any given month, balances left on base rates would amount to hundreds of millions of dollars in forgone interest across the system over time.
Competitive pressure
Kiwibank framed the issue as one of transparency and competition in the retail savings market. Stephen said savers may focus on headline rates without realising how often they fail to qualify for the higher rate, or how low the fallback rate can be.
"This means New Zealanders are often earning less on their savings than they expect. Over time, that lost interest adds up to hundreds of millions of dollars across the system."
He said Kiwibank's position reflects its role as a challenger in the market. "There are no hoops to jump through and no surprises at the end of the month. The rate we advertise is the rate our customers receive, every time. We believe value and certainty should not be conditional."
Stephen also criticised the way savings accounts are marketed. "Good competition isn't about who can promote the biggest bonus rate on a billboard. It's about who delivers consistent, transparent value in normal months, not just perfect ones.
"I'd encourage savers to look beyond headline rates when choosing where to put their money. The most important question isn't just 'what's the highest rate?' It's 'what will I actually earn when I need to access my money, when my balance doesn't grow, or when life intervenes?'"
He said simpler savings products are one way households can respond to uncertainty even when broader economic shocks remain outside their control. "Certainty matters more than ever, and savings accounts should work quietly and reliably in the background, not demand constant attention just to deliver fair value."