Banking and Money
The Depositor Compensation Scheme Explained
🏦 What the Depositor Compensation Scheme is
The Depositor Compensation Scheme (DCS) is New Zealand's protection for the money you hold in banks, building societies, credit unions and licensed finance companies. It started on 1 July 2025 and it means that if one of these institutions fails, you are compensated for your eligible deposits up to $100,000 per person, per institution. Before this scheme existed, New Zealand had no deposit protection at all, so if a bank or finance company collapsed there was no guaranteed compensation for ordinary savers. The DCS closes that gap and brings New Zealand into line with most other developed countries. It is administered by the Reserve Bank of New Zealand and funded by levies paid by the institutions themselves, and best of all it is automatic, so there is nothing you need to sign up for. This guide explains exactly what is protected, what is not, and how the $100,000 cap is worked out so you can check your own savings are fully covered.
Who runs it and how it is paid for
The scheme sits under the Deposit Takers Act 2023 and is administered by the Reserve Bank of New Zealand. It is funded entirely by levies charged to the institutions that take deposits, not by a fee on your account and not from general taxation. Those institutions are called licensed deposit takers, and they include registered banks, building societies, credit unions and the finance companies that take retail deposits and are supervised by the Reserve Bank. Every licensed deposit taker is required to publish a list of its DCS-protected products on its website, so you can always check whether a particular account is covered.
There is no form, no enrolment and no cost to you. If your money sits in a DCS-protected account at a licensed deposit taker, the protection applies automatically. The only thing you need to do is understand the $100,000 limit and make sure your own balances fit within it.
Why the scheme was introduced
Deposit protection schemes exist so that ordinary savers do not lose their everyday money if a bank runs into trouble, and so that people do not rush to withdraw cash at the first sign of a problem. For many years New Zealand was unusual among developed economies in not having one. The Deposit Takers Act 2023 created a single, modern framework for supervising deposit takers and set up the DCS as the safety net for depositors. The scheme applies to failures that happen from 1 July 2025 onwards.
How this changes the old logic of spreading money across banks
People with large balances have long been told to spread their money across several banks. Before the DCS there was no compensation attached to that advice, it simply reduced how exposed you were to any single institution. Now the advice has a precise, government-backed reason behind it: keep no more than $100,000 with any one licensed deposit taker and every dollar stays fully protected. If you hold $250,000 at a single bank, $150,000 of it is above the cap and would not be compensated if that bank failed. Split across three institutions at, say, $85,000 each, the whole $255,000 would be protected. The rest of this guide shows exactly how the cap is applied so you can position your savings correctly.
A common mistake is to assume each account gets its own $100,000. It does not. All of your eligible accounts at one licensed deposit taker are added together first, and the $100,000 cap is then applied to that combined total. Opening three accounts at the same bank does not give you $300,000 of cover.
✅ What is covered and what is not
The DCS covers standard deposit products, the kinds of accounts you use to hold and save money. It does not cover investments, where your money is put at risk in exchange for a potential return. Knowing which side of that line each of your accounts sits on is the key to understanding your protection.
Deposits that are covered
Cover applies to the everyday deposit products offered by a licensed deposit taker. These include:
- Transaction accounts: your everyday current or cheque account used for spending and bills
- Savings accounts: on-call savings where you can add and withdraw money
- Notice accounts: savings that require a set notice period before withdrawal
- Term deposits: money locked in for a fixed term at a fixed rate
These products are covered whether they are held at a registered bank, a building society, a credit union or a licensed finance company. The scheme protects individuals, joint account holders, sole traders, businesses and trusts.
What is not covered
The DCS is for deposits, not investments. It does not cover money that is at market risk or held in products that are not deposits. The following are not protected:
- Shares in companies, whether listed or unlisted
- Managed funds and other pooled investments
- KiwiSaver balances
- Bonds and similar investment products
- Loans and money you owe, which are not deposits
- Losses from scams, fraud or hacking, which are handled separately, not by the DCS
A quick test: if the product promises to return your money plus a set amount of interest and does not rise and fall with markets, it is usually a deposit and likely covered. If its value can go up or down, such as a managed fund or KiwiSaver, it is an investment and not covered. If you are unsure, ask your provider or check its published list of DCS-protected products.
The DCS only protects deposits held at institutions that are licensed deposit takers supervised by the Reserve Bank. Money placed with an unlicensed lender, an overseas platform or an investment scheme that is not a licensed deposit taker is outside the scheme. The Reserve Bank publishes a register of licensed deposit takers, and each one lists its protected products on its own website.
💰 How the $100,000 cap works
The cap is simple once you know the two rules behind it. First, the limit is per depositor, per licensed deposit taker. Second, all of your eligible accounts at one deposit taker are combined before the cap is applied. Work through your own banking with those two rules and you can see exactly how much of your money is protected.
Rule 1: per depositor, per deposit taker
Each person gets their own $100,000 limit, and that limit applies separately at each institution. If you hold money at two different banks, you have a $100,000 limit at each of them, so up to $200,000 across the two can be protected. This is why splitting a large balance across separate institutions increases your total protection.
Rule 2: accounts at one institution are combined
Within a single deposit taker, all of your eligible accounts are added together and the $100,000 cap is applied to the total, not to each account. A $70,000 term deposit and a $50,000 savings account at the same bank total $120,000, so $100,000 is protected and $20,000 sits above the cap. Splitting that same money into more accounts at the same bank changes nothing, because they are all combined first.
| Your position | Protected | Above the cap |
|---|---|---|
| $80,000 at one bank | $80,000 | $0 |
| $120,000 at one bank | $100,000 | $20,000 |
| $90,000 at Bank A plus $90,000 at Bank B | $180,000 | $0 |
| $250,000 at one bank | $100,000 | $150,000 |
Joint accounts
Joint account holders are each treated as separate depositors. The balance of a joint account is divided between the holders, and each person's share counts towards their own $100,000 limit at that institution. For a two-person joint account, the balance is split in half. So a couple with a $160,000 joint deposit each have an $80,000 share, both within the cap, and the whole $160,000 is protected. If that joint balance were $250,000, each share would be $125,000, so each person is protected to $100,000 and $50,000 in total would sit above the cap.
Your share of a joint account is added to any personal accounts you hold at the same institution before the cap is applied. If you have $60,000 in your own savings and a $75,000 share of a joint account at the same bank, your combined position there is $135,000, so $100,000 is protected and $35,000 is above the cap.
Per licensed deposit taker, not per brand
The limit applies to each licensed deposit taker as a single entity. Some banking groups run more than one brand under a single licence. Where two brands belong to the same licensed deposit taker, they share one $100,000 limit between them, so moving money from one of those brands to the other does not add protection. If you are relying on the cap for a large balance, check the Reserve Bank's register to confirm whether two names are genuinely separate deposit takers.
To keep a large balance fully protected, total up everything you hold at each licensed deposit taker, including your share of any joint accounts, and make sure no single institution holds more than $100,000. Spread the surplus to other licensed deposit takers so each tranche stays within its own cap.
🔢 Worked Examples
These four New Zealand examples show how the cap plays out in real situations. The arithmetic is straightforward once you apply the two rules: combine everything at each institution, then cap the total at $100,000 per person.
Situation: Aroha keeps $80,000 in a savings account at her main bank and has no other accounts there. She wants to know whether her money is protected.
Situation: Tama has sold a car and some shares and is holding $180,000 in cash while he decides what to do. He wants it all protected.
Option A: everything at one bank
Option B: split across two banks
By splitting the same $180,000 across two licensed deposit takers, Tama moves from having $80,000 exposed to having the full amount protected. Each institution provides a separate $100,000 limit.
Situation: Mere and Hone hold a $160,000 joint term deposit at one bank and have no other accounts there. They want to know how the cap treats a joint account.
Situation: Ravi has a $95,000 one-year term deposit and $12,000 in an everyday transaction account, both at the same bank. He assumed each account had its own $100,000 limit.
Ravi's two accounts are added together before the cap is applied, so $7,000 is above the limit. To protect all of it he could move at least $7,000 to a second licensed deposit taker, which would bring his combined balance at the first bank down to $100,000 or less and cover the rest under a fresh $100,000 limit at the second.
Related tools and guides
- Term Deposits guide, how fixed-term saving works and how it fits your plan
- Bank Account Security guide, keeping the money in your accounts safe from fraud
- Banking Hardship guide, options if you are struggling to keep up
- Term Deposit Savings Calculator, project the return on a fixed term
- Savings Account Interest Calculator, estimate interest on an everyday balance
Verified against the Reserve Bank of New Zealand (rbnz.govt.nz): the Depositor Compensation Scheme pages including What the DCS covers and How much money does the DCS protect, the news release Depositor Compensation Scheme now in effect (1 July 2025), and the Deposit Takers Act 2023. Figures and rules are current as at 24 July 2026. Each licensed deposit taker publishes its own list of DCS-protected products, so check yours if you are unsure whether a specific account is covered.
🎯 Test Your Knowledge
Complete this 10-question quiz to check your understanding of the Depositor Compensation Scheme
If you've found a bug, or would like to contact us, or learn more about James Graham and Calculate.co.nz.
Calculate.co.nz is partnered with Interest.co.nz for New Zealand's highest quality calculators and financial analysis.
Calculate.co.nz is the sister site of CalculatorHub.com, the world's largest calculator website by tool count.
All calculators and tools are provided for educational and indicative purposes only and do not constitute financial advice.
Calculate.co.nz is proudly part of the Realtor.co.nz group, New Zealand's leading property transaction literacy platform, helping Kiwis understand the home buying and selling process from start to finish. Whether you're a first home buyer navigating your first property purchase, an investor evaluating your next acquisition, or a homeowner planning to sell, Realtor.co.nz provides clear, independent, and trustworthy guidance on every step of the New Zealand property transaction journey.
Calculate.co.nz is also partnered with Health Based Building and Premium Homes to promote informed choices that lead to better long-term outcomes for Kiwi households.
Calculate.co.nz is hosted in Auckland by SiteHost New Zealand.
All content on this website, including calculators, tools, source code, and design, is protected under the Copyright Act 1994 (New Zealand). No part of this site may be reproduced, copied, distributed, stored, or used in any form without prior written permission from the owner.
About & trust: Why Calculate is NZ's most comprehensive · By the Numbers · How we compare · Editorial standards · How we keep data current · NZ finance glossary · Research & data · Financial literacy NZ · About · Privacy policy · Terms of use
Reviewed and maintained. Last reviewed 2026-08-10 and checked on a twice-monthly cycle against IRD, RBNZ and Stats NZ. How we keep data current.
© 2026 Calculate.co.nz. All rights reserved. Building free NZ calculators since 2011.