TSB Bank NZ: Accounts, Awards, Deposit Protection and the Heartland Merger

TSB is one of New Zealand’s few remaining independent, locally owned banks. It has a long Taranaki history, a run of recent Canstar awards and — as of 2026 — a proposed merger with Heartland that would reshape it.

This guide sets out the facts a New Zealander would want before opening an account or moving savings across: who owns TSB, what its main products do, how your interest is taxed, how your deposits are protected, its regulatory record, and exactly where the Heartland deal now stands.

It is general information, not financial advice or a recommendation.

Who owns TSB, and why that matters

TSB traces back to 1850, when it opened as the New Plymouth Savings Bank and took its first deposit on 28 September that year. It was renamed the Taranaki Savings Bank in 1964 and became TSB Bank in 1989.

Since 1988 it has been owned by the Toi Foundation (formerly the TSB Community Trust), a Taranaki-based charitable trust that holds the bank through its holding company, Toi Foundation Holdings Limited. The foundation also works alongside Fisher Funds, and over the years TSB dividends have helped it invest more than $250 million back into the Taranaki region.

This is what people mean when they call TSB a “profit for purpose” bank. There is no overseas parent taking dividends offshore, so the bank’s profits stay in New Zealand, and a share of after-tax profit flows to the Toi Foundation, which distributes grants across Taranaki.

Keep the scale in perspective, though. TSB is a smaller player — a little over 1% of the market by assets and roughly the seventh-largest bank in the country. It is genuinely local and independent, but it is not one of the big four. If you want a sense of how the majors operate by comparison, our guide to Westpac NZ walks through a big-four bank’s product range.

Award-winning everyday accounts

TSB was named Canstar’s 2026 Bank of the Year for Everyday Banking, and it also holds Bank of the Year for Credit Cards for the fourth year running. Canstar’s everyday award weighs products, price, features and customer satisfaction together across transaction accounts, savings accounts and cards, so it is a reasonable signal of all-round value rather than a single headline rate.

The products behind that recognition are deliberately straightforward.

Connect Plus (everyday transaction account)

Connect Plus is the day-to-day transaction account. It has no monthly account fee and unlimited electronic transactions. Like most transaction accounts, it does not pay interest — its job is to move money, not store it.

WebSaver (on-call savings)

WebSaver is an on-call savings account that pays interest on the whole balance with no bonus hoops or withdrawal conditions attached. The rate moves with the market, so always check the current figure before relying on it. If you are shopping purely on return, compare it against the wider market using our roundup of high-interest savings accounts in NZ.

Low Rate Mastercard (credit card)

The Low Rate Mastercard is built around a low purchase interest rate — 11.95% p.a. at the time of writing — rather than rewards points. That makes it better suited to people who occasionally carry a balance than to heavy spenders chasing Airpoints or cashback.

One practical note: TSB updated its general and overdraft terms in mid-2026, changing how interest and some fees are calculated on certain accounts. Rates and fees change often, so confirm the current numbers on TSB’s own website rather than any third-party summary — including this one.

How your savings are taxed: RWT, PIE and the PIR

This is where many savers quietly leave money on the table, so it is worth explaining plainly.

Interest you earn is normally taxed through Resident Withholding Tax (RWT) — tax the bank deducts before paying you, at a rate tied to your income. For higher earners that can be 33% or 39%.

A Portfolio Investment Entity (PIE) is a type of investment structure with its own tax rules. Money held in a PIE is taxed at your Prescribed Investor Rate (PIR), and the top PIR is capped at 28%. So a high earner using a Term PIE instead of a standard term deposit can pay less tax on exactly the same interest — without taking on any extra risk.

TSB offers its fixed-term savings both as standard term deposits and as Term PIE options, typically from around a $1,000 minimum. The catch to watch is that you must declare the correct PIR. Get it wrong and you can end up with a tax bill, or a shortfall to square up with Inland Revenue.

If you want to understand the wider rate bands first, see our guide to NZ tax rates. If this money is really earmarked for retirement, weigh a term deposit against your KiwiSaver strategy, and if you are comparing fixed terms across banks, our overview of current term deposit rates is a useful starting point.

Logging in and staying secure

Online banking access uses a two-part login: a Customer ID and a password you set. Beyond that, TSB applies the security layers that are now standard across New Zealand banks.

Multi-factor authentication (MFA) — an extra check on top of your password — sends a one-time code to your registered phone for higher-risk actions such as large payments. In plain terms, knowing your password alone is not enough to move your money.

The mobile app supports fingerprint and face login on compatible devices, and the desktop login offers an on-screen keyboard option to reduce the risk from keystroke-logging malware. Repeated failed login attempts temporarily lock online access as a protective measure.

For the exact login steps, the current security-code process, or if you are locked out, use TSB’s official app, website or phone line — and treat any email or text asking for your full login details as a likely scam. No New Zealand bank will ask you to confirm a password or a one-time code by replying to a message.

Is your money safe? Deposit protection explained

New Zealand now has a formal safety net. The Depositor Compensation Scheme (DCS) went live on 1 July 2025 and is run by the Reserve Bank of New Zealand.

Under the DCS, eligible deposits are protected up to $100,000 per depositor, per licensed deposit taker, if a bank fails. Cover is automatic — there is nothing to sign up for — and it applies to everyday products such as transaction, savings and term deposit accounts, for individuals and for entities like companies and trusts.

Separately, TSB carries an investment-grade long-term credit rating (A− from Fitch as at late 2024), which is one external signal of financial strength. A credit rating is an independent agency’s assessment of how likely an institution is to meet its financial obligations; A− sits well inside investment grade.

Taken together, the DCS cover plus an investment-grade rating mean the everyday risk to a typical TSB saver is low — the scheme is designed precisely for the rare event of a deposit taker failing.

TSB’s regulatory record

A neutral guide should be candid about this. TSB has had two notable responsible-lending issues on the public record.

In 2024, the High Court ordered TSB to pay a $2.47 million penalty after it overcharged around 42,000 credit-contract customers roughly $3.6 million in credit and default fees between 2015 and 2021. TSB had self-reported the problem to the Commerce Commission in 2022 and refunded affected customers (about $6 million including interest), and the court applied a 35% discount to recognise that cooperation. It was the first pecuniary penalty ever issued under the Credit Contracts and Consumer Finance Act (CCCFA).

In June 2026, the Commerce Commission secured settlement agreements with ASB, TSB and Nelson Building Society over responsible-lending failures. TSB’s related to insufficient processes, controls and governance around its overdraft products; impacted borrowers are to be proactively remediated.

Context matters here. From 1 July 2026, oversight of the CCCFA passed from the Commerce Commission to the Financial Markets Authority (FMA), which is now New Zealand’s single conduct regulator for lending and runs a new licensing regime for lenders. If you are comparing lenders more broadly, our personal loans guide explains what responsible lending means from a borrower’s point of view.

The proposed Heartland merger

The biggest change on TSB’s horizon is a merger, and it is moving quickly.

On 1 June 2026, Heartland Group Holdings (listed on the NZX and ASX) signed a conditional agreement to buy all TSB shares from the Toi Foundation for $620 million — about 76% of TSB’s book value as at 31 December 2025. The consideration is a mix of roughly $250 million in Heartland shares, a $264 million vendor loan, $56 million of subordinated debt and a $50 million pre-completion dividend from TSB. The Toi Foundation would then reinvest to hold about a 17.5% stake in Heartland.

Heartland Bank and TSB would merge into a single bank called TSB Heartland Bank, with roughly $15 billion in New Zealand assets — around the seventh-largest bank in the country. The combined bank would pair Heartland’s specialist products, such as reverse mortgages and livestock and asset finance, with TSB’s everyday accounts, cards and branch network.

The deal is targeting completion in December 2026, but it remains conditional. It requires community consultation with Taranaki residents, Heartland shareholder approval, and New Zealand and Australian regulatory approvals. As of late 2026, the picture looks like this:

• The Toi Foundation trustees approved the sale after their consultation process.
• The Taranaki Community Accountability Society sought a High Court injunction to stop the trustees voting; the court dismissed that application on 24 August 2026, finding the group had no legal standing because a charitable trust has no beneficiaries entitled to enforce it.
• Heartland held a special shareholder meeting on 30 September 2026 to vote on the acquisition.
• The Reserve Bank issued TSB a Section 95 notice on 18 September 2026 requiring independent assurance on its liquidity, capital adequacy and regulatory reporting; TSB appointed Deloitte, with a report expected in November 2026.

In short, this is an advanced proposal rather than a finished deal, and the remaining approvals still have to fall into place before completion.

For depositors, one detail is worth planning around now. While TSB and Heartland remain separate banks, your deposits are protected up to $100,000 at each of them under the DCS. If they become a single deposit taker, the $100,000 limit would apply once across the combined entity — so anyone holding large balances at both banks may want to review how their money is spread.

Who TSB suits

No bank is right for everyone. On the facts above, TSB tends to appeal to:

• People who value local ownership and want their banking profits to stay in New Zealand and support the Taranaki community.
• Everyday bankers who want a fee-free transaction account and a simple, award-recognised product range rather than a complex rewards ecosystem.
• Occasional credit-card balance carriers who benefit more from a low interest rate than from points.
• Higher-rate taxpayers who can use a Term PIE to cap the tax on their interest at 28%.

It is less of a natural fit if you want a big-four branch on every corner, a large rewards or Airpoints programme, or the broadest possible range of specialist lending — though the proposed Heartland merger could widen that lending range over time.

The bottom line

TSB is a long-established, independent, New Zealand-owned bank with well-regarded everyday accounts and a genuine local-community model. It has a real regulatory record around historical lending compliance, and its future ownership is in the middle of a proposed — and closely scrutinised — merger with Heartland.

If TSB is on your shortlist, the sensible steps are to check current rates and fees directly, confirm which accounts are DCS-protected, make sure your PIR is correct if you use a Term PIE, and keep an eye on the merger’s progress.

Disclaimer: This article is general information about TSB Bank and New Zealand banking, not financial advice, and it is not an endorsement or recommendation to open, switch or close any account. Rates, fees, products and the proposed merger can change. Do your own research and consider advice from a licensed financial adviser before making decisions. For free, independent guidance see Sorted (sorted.org.nz); for deposit protection details see the Reserve Bank (rbnz.govt.nz/dcs); and for the conduct regulator see the FMA (fma.govt.nz).

Frequently asked questions

Is TSB a New Zealand-owned bank?

Yes. TSB has been owned since 1988 by the Toi Foundation, a Taranaki-based charitable trust, and it is one of the few sizeable banks in New Zealand that is fully locally owned and independent, with no overseas parent.

Has TSB won any recent banking awards?

Yes. It was named Canstar’s 2026 Bank of the Year for Everyday Banking, and it has held Canstar’s Bank of the Year for Credit Cards for four consecutive years.

How does a Term PIE reduce tax on my savings?

Standard interest is taxed at your Resident Withholding Tax rate, which can be 33% or 39% for higher earners. A Term PIE is taxed at your Prescribed Investor Rate, which is capped at 28%, so higher earners can keep more of the same interest. You must declare the correct rate to Inland Revenue.

Is my money at TSB protected if the bank fails?

Eligible deposits are protected up to $100,000 per depositor, per licensed deposit taker, under the Depositor Compensation Scheme, which has been in force since 1 July 2025 and is run by the Reserve Bank of New Zealand. Cover is automatic.

What is happening with the TSB and Heartland merger?

Heartland Group Holdings has agreed, subject to conditions, to buy TSB for $620 million and merge it with Heartland Bank to form TSB Heartland Bank, targeting completion in December 2026. The Toi Foundation has approved the sale, a High Court challenge to the trustees’ process was dismissed in August 2026, Heartland shareholders voted on 30 September 2026, and regulatory approvals are still being worked through, so it is not yet finalised.