The financial institutions which offer this product usually house them under the business finance umbrella, so you may need to talk to a business account manager if you’re looking to compare term deposits for your SMSF. These are the factors you should compare when considering your options with Savvy:
The interest rate offered for term deposits varies widely. Naturally, the higher the interest rate, the better. Many financial institutions offer a tiered level of interest, with a set interest rate for the first $250,000 deposited and another (often lower) rate for deposits in excess of this. Naturally, the rate offered also depends on the period over which you choose to deposit your funds, with higher rates for longer terms.
In June 2022, the best high interest term deposit rates can be found with AMP Bank and Rabobank. AMP currently leads the way, offering a maximum of 4.15% p.a. for a five-year term on balances from $25,000 to $1 million.
There are often conditions imposed on SMSF term deposits, such as minimum deposit limits. For example, some funds have a minimum deposit of $5,000, while others could raise it as high as $25,000, so you should consider these limits.
Some funds are limited to a maximum cap of $250,000 up to $5 million for certain interest rate terms, or they offer a lower interest rate over a set amount, so it’s important to compare to find an institution that can accommodate the size of your large deposit.
These vary from one month right up to five years, so when you’re considering which bank to invest with, make sure they offer the term you’re after.
Luckily, fees for SMSF term deposits are rare, so you shouldn’t be paying any fees or charges. However, different providers will have different penalty fees for early access, which can reach up to 90% of the interest you would’ve earned or flat fees of around $30 to $50.
Some institutions offer an incentive (such as a small bonus interest rate) to roll over your funds at the maturation of your term, so keep an eye out for these special offers.
- Interest payment frequency:
You can choose to receive your interest monthly, quarterly, annually or at maturity. Consider the effects of compounding very carefully before deciding which interest option to choose.
