Friday 30th January 2009
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What is it called and what sort of savings product is it?
ASB Bank's Term Funds which comply with the portfolio investment entity (PIE) tax rules.
Who is the company behind it?
ASB Bank is owned by Commonwealth Bank of Australia. It has a Standard and Poor's rating of AA- and has been around for 160 years.
Who is the target market?
Investors on 33 and 39 per cent tax rates wanting a tax effective term deposit.
What return does it offer?
Anywhere from 4 per cent for the shorter term to 5.25 per cent. But for people on 33 and 39 per cent marginal tax rates the returns increase to 4.59 per cent to more than 6 per cent.
When was it launched?
The bank rolled out the PIE versions for its term deposits just before Christmas. Its actual term deposits have been around for many years.
What other products is it like or is it competing with?
ASB is competing with all the banks who have PIEs, as well as finance companies. However it is the only one to convert the majority of its terms into PIEs. Its competitors are here.
Is it long term, short term or medium term?
Take your pick from the shortest term available, four months, to five years.
What is the unique selling point?
ASB has differentiated its offering by, paradoxically, keeping its term funds as similar to non-PIE ones, and also offering a far wider range of maturities than other institutions.
How strong a stomach do you need for it?
Term deposits are one of the lower risk options available to investors.
What's the hitch?
Because they are low risk, they are also low return, especially right now with the official cash rate coming down another 150 basis points this week.
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