Over the past 12 – 18 months, a theme has consistently come up in our conversations with clients: term deposits (TDs) just aren't doing the job they used to. When interest rates were higher, the safety and predictability of a TD offered a comfortable cushion. But today, for many Kiwis, term deposits are struggling to meaningfully grow their money. 

Households hold around $160 billion in TDs, according to recent Reserve Bank of New Zealand data, meaning tens of billions of dollars roll over every year. With the RBNZ having cut the Official Cash Rate (OCR) to 2.25%, term deposit rates are also falling: rates that recently started with a 4 are now starting with a 3. 

When you stack that against Stats NZ’s latest Consumer Price Index (CPI) inflation rate of 3%, a TD is barely holding its value. And once tax is applied, many term deposit investors are actually finding themselves going backwards.

• Retirees: Many retirees rely on TDs for steady income. As rates fall, so does that income, making it harder to keep pace with the rising cost of living. They need strategies that produce sustainable, inflation-beating income.
• 40–50-year-olds (the time-poor): This group is juggling career and family, often without the headspace to reconsider their TDs. They typically don't need immediate income and have the luxury of a longer time horizon – ideal for growth - yet many default to low-return TDs simply out of habit.
• Those with past negative investment experiences: Investors who were burned during downturns, such as the Global Financial Crisis (GFC), often stick to TDs because they feel safe. We encourage these investors to take a measured, low-risk step into slightly more growth-orientated investments to rebuild confidence – without jumping into anything extreme.

Exploring smarter alternatives 
If your TD isn’t even matching inflation, what else is out there? The key is understanding that ‘investing’ doesn’t automatically mean high-risk shares. While strong equity markets can be attractive, diving headfirst into a growth fund without a clear plan invites unnecessary risk.

A smarter approach is to look across the risk spectrum:

• Conservative / fixed income funds: These focus on high-quality government and corporate bonds. They don’t offer the guaranteed rate of a TD, but historically, their long-term returns have been higher.
• Property and infrastructure funds: For those ready to take a small step up in risk, these funds offer exposure to sectors with stable, income-generating characteristics - often less volatile than broader share markets.
• Growth and global funds: For investors with a longer time horizon, actively managed growth funds identify high-quality businesses with strong fundamentals. Unlike passive investing, our active approach means we don’t follow the herd - we make decisions based on rigorous research to capture long-term tailwinds and drive performance.

Get guidance before you leap 
Before shifting out of term deposits, the priority is to get good advice. Don’t move your money just because rates are falling - make a plan that matches your goals. Your situation, your timeline, and your appetite for risk are unique to you. That's why our team at Pie Funds is here to assess your portfolio, understand what ‘making your money grow’ really means for you, and build a tailored investment strategy that we can actively manage and monitor. If you’re feeling the pinch of falling TD returns, or you’re simply unsure of your next step, we’re here to help.