What’s the difference between a term deposit and an ASB Term Fund account?
There are two key differences between a term deposit and an ASB Term Fund account:
How the investment is taxed, and
When you can access your money
At a glance:
|
Tax rate |
When money can be accessed |
Term deposit |
Your income tax rate |
At maturity or with 31 days’ notice. Earlier access is also possible in exceptional circumstances approved by ASB. |
ASB Term Fund |
Your Prescribed Investor Rate (PIR) |
At maturity only. Early access is only possible in exceptional circumstances approved by ASB. |
How the investment is taxed:
With a term deposit, your interest is taxed at your income tax rate.
With an ASB Term Fund, your share of income earned by the ASB Term Fund is taxed at your Prescribed Investor Rate (PIR) of 0%, 10.5%, 17.5% or 28%.
So, if your income tax rate is more than 28% during the term of your deposit, you could get a better after-tax return by investing in an ASB Term Fund compared to the after-tax return of a term deposit offering the same rate for the same term and charging the same fees.
You can work out your PIR using our PIR calculator, or visit Inland Revenue’s website for more information on PIRs.
When you can access your money:
With a term deposit, you can access your money before the maturity date either by giving us 31 days’ notice or applying for an early withdrawal under ASB’s exceptional circumstance application process. A reduced interest rate will be applied to the amount withdrawn early.
With an ASB Term Fund, you won’t be able to access your money until maturity date. Early access before maturity date is only possible in exceptional circumstances approved by ASB. A break fee will be charged for early withdrawals from your account.
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