They answer three different questions
It is tempting to compare them as competing investments. They are not:
- NZ Super is a government pension, not an investment. You cannot contribute to it and you cannot withdraw from it.
- Term deposits are capital-guaranteed savings with a fixed rate and a fixed end date.
- KiwiSaver is a managed investment with market risk, employer and government top-ups, and long-run growth.
The real decision is how much money you want in each role: guaranteed income, guaranteed capital, and growth.
Side by side (2026 figures)
| KiwiSaver | NZ Super | Term deposit | |
|---|---|---|---|
| Return | 4%–6% net p.a. long run (fund dependent) | $555.15/wk net single living alone; $1,708.16/fn combined couple | ~3.5%–4.7% fixed for 6–12 months |
| Risk | Market risk; can fall 15%+ in a bad year | Policy risk; no capital at stake | Very low, covered to $100,000 per institution |
| Tax | PIE tax at 10.5/17.5/28% inside the fund; tax-free withdrawals at 65 | Taxed at your marginal rate (M/S codes) | Taxed at your RWT rate, or PIR if held via a PIE fund |
| Access | Locked until 65 (exceptions: first home, hardship, serious illness) | From 65, fortnightly for life | Any time, break fees apply |
| Free top-ups | Employer 3.5% + government up to $260.72 | None | None |
The two things KiwiSaver has that nothing else does
- The employer match. 3.5% of your gross pay from your employer (4% from 1 April 2028) costs you nothing and is unavailable anywhere else.
- The government contribution. 25 cents for every dollar you contribute, up to $260.72, for anyone aged 16+ earning $180,000 or less.
Together those are an immediate return that no term deposit can approach. On a $70,000 salary, contributing 3.5% pulls in $2,450 in employer money plus $260.72 — roughly a 32% top-up on your own $2,450.
Where term deposits actually earn their place
- A 3–6 month emergency fund — the money you need before the next payday, so you never sell investments or borrow on a card.
- A house deposit within 3 years — a 15% sharemarket fall would wipe out your plan; a fixed rate locks the outcome.
- The defensive bucket at retirement — three years of withdrawals parked safely so a crash cannot force you to sell.
What term deposits are not good at is a 20-year horizon. At 4% taxed at 33%, a term deposit returns around 2.7% net versus an assumed 5.5% net for a growth fund — which is why long-run retirement money belongs in KiwiSaver, not on term deposit.
A sensible split
| Goal | Best home |
|---|---|
| Next 6 months of expenses | Term deposit or on-call savings |
| House deposit in 2 years | Term deposit or PIE cash fund |
| Retirement 20+ years away | KiwiSaver growth fund (up to $1,042.86 minimum, more if you can) |
| Income after 65 | NZ Super plus KiwiSaver withdrawals |
| First-home deposit | KiwiSaver withdrawal (leave $1,000 in the account) |
Deep dive — 2026 update
Worked comparison: $30,000 over 20 years
Same $30,000, same 20 years, three homes for the money. Tax assumptions: 30% marginal/RWT rate for the term deposit, PIE 28% inside a growth fund, and a 4% net-of-fee gross assumption for KiwiSaver's balanced option.
| Where it sits | Gross return | After tax | Value after 20 years |
|---|---|---|---|
| Term deposit (rolling 12 months) | 4.0% | 2.8% | $52,700 |
| KiwiSaver balanced fund | 5.5% | ~4.5% | $72,200 |
| KiwiSaver growth fund | 6.5% | ~5.3% | $84,100 |
None of this includes the employer match or the government contribution, which would widen the gap dramatically for anyone working. The lesson is not "growth funds always win" — it is that a 20-year horizon and a 4% fixed rate are a poor match, because tax eats a third of the return.
How tax changes the ranking
- Term deposit: interest is taxed at your RWT rate — up to 39% at the top. Held through a PIE fund, the rate is capped at 28%, which is why PIE term funds beat direct term deposits for higher earners.
- KiwiSaver: fund earnings are taxed at your PIR (10.5%, 17.5% or 28%), and the growth is not taxed again when you withdraw at 65.
- NZ Super: taxed at your marginal rate through the M or S tax code, like salary.
For a 33% or 39% earner, the tax advantage of a PIE or KiwiSaver structure is worth roughly 5–11 percentage points of return. That is often more than the difference in headline rates.
How NZ Super fits into the plan
NZ Super is the floor, not the plan. A couple who both qualify receive $1,708.16 a fortnight net — about $44,400 a year — which covers basic living costs in most parts of New Zealand but leaves no room for travel, a new car or unexpected medical costs.
The practical target most NZ advisers work with is retirement income of 60–70% of pre-retirement earnings. For someone on $80,000, that is $48,000–$56,000 a year — meaning KiwiSaver needs to produce roughly $4,000–$12,000 a year on top of NZ Super, which at a 4% withdrawal rate implies a balance of about $100,000–$300,000. That is the number to check your current balance against, not the headline figure someone quotes at a barbecue.