Why savers get to stay $100,000 safer these days

The Depositor Compensation Scheme protects our savings in the unlikely event our bank, building society, credit union or finance company falls over.

So here’s something that doesn’t happen every day: you get $100,000 of protection for your savings – and all the peace of mind that comes with that – without having to pay for it. Not bad, huh?

Yet that’s exactly what’s happened for New Zealanders since the Reserve Bank rolled out the Depositor Compensation Scheme, which it now runs to cover us in case any bank, building society, credit union or finance company here goes out of business and has to close its doors with our money inside.  

C’mon, that will never happen, right?

Well, it wasn’t that long ago – in the days before the Reserve Bank oversaw finance companies – that a bunch went belly up. But you’re right: generally, it’s exceedingly rare and not something that should keep us stressing or up at night. 

“One of the reasons for deposit insurance, such as the DCS, is really to do with financial stability, particularly in a failure situation,” said Cavan O'Connor-Close, who looks after the scheme at the Reserve Bank. 

“While it might not completely eliminate the risk of a bank run, it certainly reduces it. People can rest assured that they are protected up to the limit, which in our case is $100,000 per depositor, per institution.”  

A bank run? That seems so last century, and yet…

“We haven't had a significant failure of a deposit taker in a long time,” O'Connor-Close explains. “But when you look around the world, there have been failures that have drawn attention, such as Silicon Valley Bank and Credit Suisse not that long ago.” 

In fact, there were indeed people lined up down the street outside Silicon Valley Bank in the U.S. in 2023, trying to yank their money out. And Credit Suisse was a major institution, far larger than any of the banks we have here.

So mechanisms like the Depositor Compensation Scheme are like insurance: they provide peace of mind at the moment, but then really don’t matter to us… until they do.

Here’s what the Depositor Compensation Scheme covers 

Your savings are covered for up to $100,000 per person for each bank, building society, credit union or finance company separately. 

So if you have $80,000 at ASB and $90,000 at Kiwibank, you're fully covered at both. But if you have $150,000 all at ASB across three different accounts, only $100,000 of that is protected. The limit is per institution, not per account. 

It’s important to also know that an individual person or a trust is viewed as a separate depositor, so if you had a personal account plus a trust set up under a trust deed, that's another $100,000 of coverage for the trust, too. 

What’s covered includes everyday accounts: transaction, savings, and term deposits. Call accounts, kids' accounts, some portfolio investment entities (PIEs), and even credit cards that are in credit too. 

Apps and fintechs

These days you may find yourself saving in an app by a fintech startup, with your money then held behind the scenes in a traditional bank. How much you are protected, O’Connor-Close says, depends on the specific trust arrangement the fintech has set up for your money.

“Often fintechs use trust arrangements to hold their customers’ funds at a regulated deposit taker. Where that is the case, and if the trust arrangement is done properly, the funds may be protected against the failure of the regulated deposit taker at which they are held, always up to the limit of $100,000 per depositor,” he says.

“However, the DCS provides no protection against the failure of the fintech and cannot help with accessing those funds if that were to happen.”

So you’re probably protected, but it helps to check, since fintechs are not regulated in the same way.

Here’s what the Depositor Compensation Scheme doesn’t cover 

KiwiSaver and other investments 

Even though your KiwiSaver might be with your bank, your KiwiSaver is an investment, not savings, so it's outside the scheme. (Here’s more on the difference between savings and investments.) 

The same goes for other investments like bonds, shares, and managed funds – even if you bought them through your bank. No derivatives or other investment products either… that’s not what this is for. 

Scams and fraud  

If someone tricks you into sending them money, or hacks your account and drains it, this won't help. It only kicks in if the actual financial institution fails.

The scheme protects you from your bank going under, not from criminals targeting you. There are other fraud protection and dispute processes for that. 

Foreign currency accounts

Only New Zealand dollar accounts are covered. If you keep money in USD, AUD or any other currency, it's not protected. 

The scheme also doesn't cover any overdrawn accounts or loans.

The bottom line: If it's a standard NZ dollar account wherever you park money – a transaction account, savings account, term deposit – at an institution on this list, you're covered.  

Some scenarios that can guide your real decisions

The $100,000 coverage sounds straightforward until you start thinking about joint accounts, kids' accounts, or whether having multiple savings accounts helps. Here's how it plays out in practice. 

Joint accounts: you’d each get up to $100,000 

If you and your partner have a joint account with $150,000, you'd each get $75,000 back (your equal share), and you'd lose nothing. 

The coverage splits evenly between account holders, and each person's share counts toward their individual $100,000 limit at that bank. 

Multiple accounts at the same bank doesn’t mean you’re covered more 

Say you have $60,000 in an ASB savings account, $50,000 in an ASB term deposit, and $30,000 in your ASB transaction account. That's $140,000 total. 

If ASB failed, you'd only get $100,000 back. Having three separate accounts doesn't give you three separate limits – it's one $100,000 limit per person per bank, full stop. 

Different banks means separate protection 

But if you had $60,000 at ASB, $50,000 at Kiwibank, and $30,000 at BNZ, you'd be fully covered at all three. Each institution has its own separate $100,000 limit. So if you have more than $100,000 in cash you could spread it across multiple institutions. 

Kids’ accounts are protected... if in the child’s name

If the account is in your child's name, they have their own $100,000 protection limit, separate from yours. But if you've opened an account in your own name ‘for’ your child, that money counts toward your $100,000 limit at that bank, not theirs.  

If you’re a sole trader or a business partner 

Your business accounts and personal accounts at the same bank are combined under one $100,000 limit. You're not two separate entities.

But if you own your own business (a limited liability company) it works differently – the company is treated as a separate customer and is covered up to $100,000 itself.

You’re already protected, but here are some things you should do 

1. Check what’s covered.  

Every institution taking in deposits is required to list their DCS-protected products on their website. It takes two minutes to confirm which of your accounts are covered:  

• Find your deposit taker on this list.
• Click the link next to your deposit taker to see what DCS-protected products they offer. 

If you have money deposited with a fintech, drop them a line to see if you are covered.

2. Keep your contact details up to date.

If the Reserve Bank or the appointed receiver needed to reach you after a failure, they'd need current contact information. Make sure your email and phone number are up to date with any institution where you hold deposits.

3. Consider your options if you have more than $100,000 at one place.

If you have more than $100,000 with a single bank, you have three options:

• Accept the risk: Bank failures are rare, and you might be fine with the convenience of keeping everything in one place.
• Spread it around: Open accounts at different banks to get separate $100,000 protection at each.
• Invest some: You could put money beyond $100,000 into other options like managed funds, although they might not be protected in the same way.

4. Skip the panic about KiwiSaver. 

True, your KiwiSaver isn't covered by the scheme. But it's also not sitting in a bank account that could fail – it's invested in a diversified portfolio managed by your provider. Different protection framework, different way to handle risk. Here’s more on how safe your KiwiSaver money is.

The finer details on the Depositor Compensation Scheme are at dcs.govt.nz. You can also see the full list of institutions that offer DCS-protected products on the site – are yours there? 

The scheme is a safety net worth understanding, even if we never need to use it. And hey, we didn’t need to pay anything for it either.