ANZ recently announced that it is winding up its Bonus Bond scheme, blaming low interest rates as the cause. Ben Kelleher, ANZ’s Managing Director for Retail and Business Banking explains “Low interest rates have reduced the investment returns of the scheme which affects the size of the prize pool. It has now become apparent those trends are likely to continue in the medium term. The Official Cash Rate, currently at a historically low 0.25%, may fall further in early 2021 as the global economy grapples with the impacts of Covid-19.”
The scheme will continue to operate, with two more prize draws expected in September and October. The ANZIS Board is likely to start winding up the scheme no later than the end of October.
What to do?
Investors have two choices:
- They can redeem their Bonus Bonds before the scheme starts to wind up, or
- Stay in the scheme and be entitled to a share of the remaining reserves, after expenses, when the scheme is wound up. During the wind up the remaining investments will be locked in, which may take up to 12 months.
In light of low interest rates, it is going to be a challenge for many Bonus bond investors to decide where to invest their savings now. Looking for alternatives that will offer a higher-returns than bank term deposit rates can carry risk. The FMA has taken the initiative and produced a handy booklet on Managed Funds and Exchange traded funds (also known as ETFs) called ‘Funds for Everyone’, which helps explain how they work and the kinds of returns you could expect.
Managed Funds offer a mix of shares, property, fixed interest and cash, which can then be allocated according to the level of risk you are willing to take – very similar to KiwiSaver.
Our team is happy to talk to clients who are investing for their retirement but are unsure where to put their Bonus Bond savings. If you would like to grow your money in a diversified investment portfolio give us a call today or email your adviser.
For more on negative interest rates and investment diversification please read our article on Living with Negative Interest rates