Breaking a term deposit early

We realise that sometimes you might need to access some or all of your money from a Term Deposit or PIE Term Deposit before the term is up. If we agree to an early withdrawal, an early termination charge or penalty may apply.

How to break your Term Deposit

You'll need to apply to break your deposit early, as you'll be breaking the contract you made with us. If we agree that you can break your Term Deposit, a charge may apply.

Breaking a standard Term Deposit

  • Before 30 days: You won’t receive any interest if you break your Term Deposit in the first 30 days after you set it up. This means you'll get your original deposit back, but with no interest.
  • After 30 days: After the first 30 days, an early termination charge may apply to the interest you'll receive on the amount you want to withdraw early

Working out the early termination charge

The charge is a reduction to the interest you’ll receive on the amount you want to withdraw early. It's the difference between what you would have received at your original interest rate and what you'd receive at the reduced rate of interest paid on the amount withdrawn.

The interest rate you'll receive on the money you withdraw early will be the lower of:

  • The advertised rate on the day your application to break is approved, for the number of days the money was actually invested, less two percentage points; or
  • The advertised rate on the day the term deposit was opened, for the number of days the money was actually invested, less two percentage points.

The advertised rate that applies is the one closest to the term completed, e.g. if your money has been in a Term Deposit for 11 months, then the 9-month advertised rate applies. The reduced interest rate won't go below 0%.

Examples

John invested $11,000 on 1 January 2019 at 3.40% for 1 year with the interest to be paid at maturity. Today is 31 May 2019 and John needs to break his Term Deposit. He applies and we agree to break the Term Deposit.

John has had his money invested for 151 days (or 5 months). On 1 January the 5-month rate was 2.80%. Today the 5-month rate is 2.60%. Today’s 5-month rate is lower than the 1 January 2019 rate so the 2.60% rate applies.

Full Term Deposit– interest at maturity

If John decides to break his Term Deposit in full:

Interest at original interest rate

Amount requested to break

$11,000

× Original interest rate

3.40%

× (Days invested ÷ 365)

(151 ÷ 365)

= Total interest earned for 151 days at 3.40%

$154.72

Interest after the penalty interest rate

Amount requested to break

$11,000

× Penalty interest rate (advertised rate to apply for days invested − two percentage points)

(2.6% − 2%)

× (Days invested ÷ 365)

(151 ÷ 365)

= Total interest received after penalty interest rate is applied (before tax)

$27.30

The charge is a $127.42 reduction to interest that is paid out ($154.72 − $27.30). This means John receives his original $11,000 plus $27.30 worth of interest. By breaking early, John has missed out on $127.42 of interest.
Part of the Term Deposit – interest at maturity

If John decides to take out $1,000 but leave $10,000 still invested in the Term Deposit:

Interest at original interest rate

Amount requested to break

$1,000

× Original interest rate

3.40%

× (Days invested ÷ 365)

(151 ÷ 365)

= Total interest earned for 151 days @ 3.40%

$14.07

INTEREST AFTER THE PENALTY INTEREST RATE

Amount requested to break

$1,000

× Penalty interest rate (advertised rate to apply for days invested − two percentage points)

(2.60% − 2%)

× (Days invested ÷ 365)

(151 ÷ 365)

= Total interest received after penalty interest rate is applied (before tax)

$2.48

The charge is a $11.59 reduction to interest that is paid out ($14.07 - $2.48). This means John receives his $1,000, while his $2.48 worth of interest will be put aside and paid out at the maturity of his Term Deposit. By breaking early, John has missed out on $11.59 of interest.

His remaining $10,000 stays in his original Term Deposit at 3.40% with the same maturity date.

Money remaining in the Term Deposit

If John had taken out more than $1,000, his remaining balance would have fallen below $10,000. In this case, his Term Deposit interest rate will drop to the rate that applies to this lower amount.

John wouldn’t be able to take out $10,001 as this would reduce his remaining balance in the Term Deposit to less than $1,000 (the minimum for a Term Deposit is $1,000). If John needed $10,001, he would have to break the whole Term Deposit.
Full Term Deposit – interim interest (monthly)

If John invested with the interest to be paid monthly instead of at maturity, and decides to break the Term Deposit in full:

INTEREST AT ORIGINAL INTEREST RATE

Amount requested to break

$11,000

× Original interest rate

3.40%

× (Days invested ÷ 365)

(151 ÷ 365)

= Total interest earned for 151 days at 3.40%

$154.72

INTEREST AFTER THE PENALTY INTEREST RATE

Amount requested to break

$11,000

× Penalty interest rate (advertised rate to apply for days invested − two percentage points)

(2.60% − 2%)

× (Days invested ÷ 365)

(151 ÷ 365)

= Total interest received after penalty interest rate is applied (before tax)

$27.30

The charge is applied against the whole amount of interest earned (including interest already paid out). In this case, the charge may result in a reduction to the original deposit paid out because we can’t get back money John has already received.

John has already received 5 monthly interest payments at the end of each month (including on 31 May 2019) that add up to $154.72, but is only entitled to $27.30 since he is breaking his Term Deposit in full. This means John receives $11,000 less $127.42 ($154.72 − $27.30). By breaking early, John has missed out on $127.42 of interest.
Part of the Term Deposit – interim interest (monthly)

If John invested with the interest to be paid monthly instead of at maturity, and decides to take out $1,000 but leave $10,000 still invested in the Term Deposit:

INTEREST AT ORIGINAL INTEREST RATE

Amount requested to break

$1,000

× Original interest rate

3.40%

× (Days invested ÷ 365)

(151 ÷ 365)

= Total interest earned for 151 days at 3.40%

$14.07

INTEREST AFTER THE PENALTY INTEREST RATE

Amount requested to break

$1,000

× Penalty interest rate (advertised rate to apply for days invested − two percentage points)

(2.60% − 2%)

× (Days invested ÷ 365)

(151 ÷ 365)

= Total interest received after penalty interest rate is applied (before tax)

$2.48

The charge is applied against the whole amount of interest earned (including interest already paid out). In this case, the charge may result in a reduction to the principal paid out because we can’t get back money John has already received.

John has already received 5 monthly interest payments at the end of each month (including on 31 May 2019) that add up to $154.72 – $14.07 of it is from the $1,000 he's breaking, but is only entitled to $2.48 of the $14.07. This means John receives $1,000 less $11.59 ($14.07 - $2.48). By breaking early, John has missed out on $11.59 of interest.

His remaining $10,000 stays in his original Term Deposit at 3.40% with the same maturity date and continues to pay monthly interest payments. The monthly interest payment amounts will now be lower as they're accruing on $10,000 instead of the original $11,000.
Access Term Deposit

John has a 2-year Term Deposit of $11,000. The Access Term Deposit feature (which is available on all Term Deposits for a term longer than 2 years) allows penalty-free breaks of up to 20% of the original deposit. This means John could break $2,200 from his Term Deposit at no penalty.

If John breaks more than the $2,200 then the charge applies to any amount over this.

Breaking a PIE Term Deposit

  • Before 30 days: You can't break your PIE Term Deposit within the first 30 days.
  • After 30 days: After the first 30 days, you’ll get a lower rate of return on the amount you withdraw as you’ll incur an early termination charge. If we agree to break the PIE Term Deposit:
    • The amount you can withdraw must be at least $500; and
    • You must either maintain a minimum balance of $10,000 or withdraw all of your balance.

Working out the early termination charge

The charge is a reduction to the return payable to you on the amount you want to withdraw early. The rate of return that'll be applied to the amount of money you want to withdraw will be your original rate of return less two percentage points, while the return payable to you will be calculated using the following formula:

Reduced return to be paid = amount to be withdrawn × (days invested ÷ 365) × (original rate of return − two percentage points) where the original rate of return is the rate of return we agreed when you invested.

The reduced rate of return applied will not go below 0%.

Examples

John invested $11,000 on 1 January 2019 in a PIE Term Deposit at 3.40% for 1 year with the return to be paid when it matures. Today is 31 May 2019 and John needs to break his Term Deposit. He applies and we agree to break the PIE Term Deposit.

John has had his money invested for 151 days (or 5 months).

Full PIE Term Deposit

If John decides to break his PIE Term Deposit in full:

Return AT ORIGINAL rate of return

Amount requested to break

$11,000

× Original rate of return

3.40%

× (Days invested ÷ 365)

(151 ÷ 365)

= Total return earned for 151 days at 3.40%

$154.72

RETURN AFTER THE PENALTY Rate of Return

Amount requested to break

$11,000

× Penalty rate of return (original rate of return − two percentage points)

3.40% − 2%

× (Days invested ÷ 365)

(151 ÷ 365)

= Total return paid after early termination charge applied

$63.71

The charge is a $91.01 reduction to the return that is paid out ($154.72 - $63.71). John receives his original $11,000 plus he also receives a return of $63.71. By breaking early, John’s return is $91.01 lower than it would have been if he’d kept his money in the PIE Term Deposit for the full term.
Part of the PIE Term Deposit

If John decides to take out $1,000 but leave $10,000 still invested in the PIE Term Deposit:

RETURN AT ORIGINAL rate of return

Amount requested to break

$1,000

× Original rate of return

3.40%

× (Days invested ÷ 365)

(151 ÷ 365)

= Total return earned for 151 days at 3.40%

$14.07

RETURN AFTER THE PENALTY Rate of Return

Amount requested to break

$1,000

× Penalty rate of return (original rate of return − two percentage points)

3.40% − 2%

× (Days invested ÷ 365)

(151 ÷ 365)

= Total return paid after early termination charge applied

$5.79

The charge is a $8.28 reduction to the return that is paid out ($14.07 - $5.79). This means John receives his $1,000, while his $5.79 worth of return will be put aside and paid out at the maturity of his PIE Term Deposit. By breaking early, John has missed out on $8.28 of return.

His remaining $10,000 stays in his original PIE Term Deposit at 3.40% with the same maturity date.

Apply to break your Term Deposit

We'll need to verify your identity to ensure the safety of your funds first. Your Term Deposit can only be broken to a New Zealand bank account.

To apply, you can:

Standard terms and conditions

Units in the Kiwibank PIE Term Deposit Fund are distributed by Kiwibank and are issued by Kiwibank Investment Management Limited. See all investments terms and conditions or pick up copies from your nearest Kiwibank.