Reviewer: Mike

some of your rates here are not correctly stated and you might want to fix them

Mike Heath: Mike thanks for pointing that out. We’ve updated the tables/charts accordingly.

Reviewer: Andy

RaboPlus, Can you please let me know why you are not offering the same headline interest rate across your savings products - ie, 3.6% in your Savings Account and Cash Advantage Fund, as other banks do? It seems RaboPlus is effectively taking the margin on the tax payer's savings entitlement, but I could be wrong. Many thanks

John Baird - Operations Manager, RaboPlus: Hi Andy, the underlying investments of the two products are different and reflect the nature and activity of the investors using them. The bank derives no direct benefit from an individual’s tax rate.

Reviewer: Ann Schofield

Dear RaboPlus Could you clarify for me please whether I will get most interest in my Master Account (3.6%) or the Cash Advantage Fund (3.15%, with effective interest at 3.6% if in 38% tax bracket). Thanks Ann

Mike Heath: Ann the results would be near to exactly the same in the scenario you describe.

Reviewer: Rick

I am keen to see your reply to Peters question written on 23 rd August - the fund also seems pointless to me.

Mike Heath: Rick, my apologies as I thought I had responded to this already. The Cash Advantage Fund offers a number of benefits, other than the straight PIE tax benefit for those on a RWT of 38%:

• The interest calculation is more favourable than traditional On Call account because it compounds daily Monday to Thursday and is simple daily for Friday to Sunday, whereas traditional On Call accounts and the cash PIEs of some of the other banks, use simply the daily interest calculation 

• Because we don’t pay out interest on a monthly basis, like a traditional On Call account, you get a deferred tax benefit. We only deduct tax when you sell units or at the end of the tax year so you get the benefit of interest on this deferred tax. 

• Whilst not specific to the Cash Advantage Fund, under the PIE regime it is possible to earn more income over and above the 19.5% tax threshold yet still remain at 19.5%.

Once again apologies for having not answered this sooner.

Reviewer: kathryn

It states - Interest on the Fund's deposit compounds daily on Tuesday, Wednesday, Thursday and Friday. On Monday, three days' interest compounds (for Friday, Saturday and Sunday). What happens to Monday's interest?

Mike Heath: Kathryn, thanks for bring this to our attention. Friday is mentioned in the statement twice which is not correct; the correct statement should be “Interest on the Fund’s deposit compounds daily on Monday, Tuesday, Wednesday and Thursday. On Friday, there’s a 3 day deposit (Friday, Saturday and Sunday)”. We shall remedy this.

Reviewer: Peter

What is the point in the cash advantage fund when the effective rate for top tax payers is exactly the same as your on call rate ? Your fund disadvatages anyone not on the top rate and has no advantage for anyone who is.It seems a totally poinless fund at present.

Reviewer: Brendan

A question about the difference in interest rates between the on-call and Cash Advantage Fund at the moment. If I am not on a 38% tax rate, then am I better off putting cash in an On-Call account than the Cash Advantage Fund?

Mike Heath: Brendan, thanks for the question. Based upon the current rates offered for both products you would approximately be better off by 0.04 of 1 percent or if you had $100,000 to invest, after tax and assuming you didn’t sell any units in the Cash Advantage Fund, you’d have earned approximately $22 more interest, after tax for the full year. If you call us on 0800 22 44 33 we can calculate the actual amounts based upon the amount of money you have to save.

Reviewer: Dan

I don't understand why your rate isn't closer to the on-call account rate, because your FAQ says that this cash fund invests in your Rabobank deposits - why doesn't it put those deposits in an on-call account and actually earn us the 3.6% pre-bonus that it should earn?

Mike Heath: Dan, the rates we pay are a function of how we invest the monies deposited with us and specifically the duration of the term investments. Currently the duration of the Cash Advantage Fund, because it is a relatively new product, is shorter than our On Call product.

Reviewer: Jane

I agree with Matt and Dori's comments. There is no 'advantage' to the Cash 'Advantage' fund over the standard savings account. The effective rates are the same for the 38% tax payer (3.6%) and it is actually a disadvantage for the 33% tax payer. Your reply to Matt is misleading. I can't see any advantage at all in investing in the CAF fund even as a 38% tax payer. Please explain if I am missing something here.

Mike Heath: Jane, thanks for the feedback. Your point is valid when the interest rate differential between the CAF and On Call is greater than then tax benefit of the CAF for those on 38% RWT.

Reviewer: Matt

Your CAF does not seem to have any advantage at the moment for the 39%RWT tax payer. Do you think the name is mesleading to investors?

John Baird (Operations Manager): Thanks for the comment Matt. The Cash Advantage Fund was named so for the tax breaks it offers the 33% and 38% tax payers.

Reviewer: Dori

To Mike Heath: Hi. Please explain why the CAF is now only paying 3.45% interest whereas the call savings a/c is paying 4% when the CAF funds are invested in Rabobank & there are not supposed to be any fees. Even your web page on CAF is incorrect stating :" Paying 39% or 33% tax on deposits you're paying too much" when your calculator show that as a 33% taxpayer I would receive more from the call a/c. This seems to have happened since the Government Guarantee - is the 0.55% interest difference the cost of the GG? Dori.

Mike Heath: Dori, thanks for the question. There is no correlation between the rates we offer for the On Call and CAF products – they act quite independent of each other. The rates we pay are a function of the wholesale rates we receive for money invested in both – currently meaning the CAF is paying less. With regards to the deposit guarantee, both incur the same levy so that is not a consideration.

Reviewer: L Bennett

What would the return be for a period of 12 months in the cash advantage fund compared with a 12 month term deposit, tax rate 19.5% deposit of $10000.

Mike Heath: Hi, assuming that both the Cash Advantage Fund (CAF) and the 1 Year TD are paying 3.85% … the CAF returns a tax effective rate of 3.92% versus 3.85% for the 1 Yr TD. The net interest would be $315.56 for the CAF and $309.93 for the 1 Yr TD.

Reviewer: Edwin

Are funds in the CAF guaranteed by the parent Rabobank like deposits?

Mike Heath: Edwin, we are still awaiting sign-off from the Treasury What we do know, once it’s given the guarantee is back-dated to 12th Oct 2008. Once we here from the Treasury we shall let our customers know straight away.

Reviewer: Karen

I read that the comparison of interest rates between on Call and CAF are as a yearly comparison, what if investing time frame was shorter, maybe 6mths, would that make any difference on returns?

Mike Heath: Karen, on the basis that the interest rates and calculations are all annualised no it doesn’t. In real dollar terms you’d earn less obviously as the compounding period is less.

Reviewer: Peter

I'm a little confused as to why the interest rate for the Cash Advantage Fund is less than that for the on-call account. Given that the former is not protected by a government guarantee, does it not carry more risk, which you would expect to be reflected in a higher interest rate?

Mike Heath: Peter, a very good question. There is not correlation, in terms of rates offered between the On Call deposit account and the Cash Advantage Fund. The rates we offer for both are a function of the underlying returns we receive for each dollar invested in them. Regards Mike

Reviewer: Claudia

I have been following your blog and am waiting for any news on the deposit guarantee scheme for PIE investments. Will you publish any changes in your newsletter?

Mike Heath: Claudia, most definitely. We shall let all customers know by way of a specific e-mail, an update to our Home Page and also in our secure banking site.

Reviewer: Rachael

I am impressed with the CAF but would like the option of a fixed-term PIE. Is this likely to happen (preferably sometime soon)?. Thanks.

Mike Heath: Rachael – we are looking at a PIE TD but can not give a firm date for it yet. Merry Xmas!

Reviewer: John

Any progress yet on the status of the Cash Fund under the deposit guarantee scheme?

Mike Heath: John, as per my most recent update on the subject, things are still progressing.  Whilst we have completed all of our obligations, the changes to the likes of the prospectus, trust deed, investment statement etc take some time including lodgement with the companies office.  Having spoken again to our legal counsel today, he expects all steps to be completed and the associated approval to be issued before Xmas.  We are very confident that our application for the Cash Advantage Fund (CAF) will be accepted and are doing all we can to speed up the process.

Reviewer: Priya

Yuo have stated that "the Cash Advantage Fund complies with the scheme and we have submitted an application specifically for it". Is the fund covered by the scheme? Has the application been approved?

Mike Heath: Priya, at the time of writing the Treasury have not approved any Collective Investment Schemes, like our Cash Advantage Fund, for any banks yet. Unlike traditional bank deposit products, Collective Investment Schemes are more "complex" in that they involve the likes of trust deeds, prospectuses and investment statements. We have been working actively with Treasury to provide the information, including amendments to these documents, they require to approve our application for the Cash Advantage Fund. There have been no issues to date with regards to this process and so we remain very confident that the Cash Advantage Fund will be covered, and it’s simply a matter of the process with the Treasury running it’s course. I hope this provides some insight into what’s happening, however if you have any further questions please do not hesitate to contact us on 0800 22 44 33.

Reviewer: James

Does your cash management fund come under the government deposit protection scheme? You seem to offer the best rates around especially your cash advantage fund. I only came across raboplus from a link in kiwimoneysavers which were listing the best rates available in NZ. So thanks to both of you I have the best savings account! But would be interested to make sure you're under the deposit protection scheme, thanks if anyone knows.

Mike Heath: James, thanks for your feedback. Yes, the Cash Advantage Fund complies with the scheme and we have submitted an application specifically for it.

Reviewer: Neil

Hi Mike, if I invested a sum at the current 7.3%, is that locked in for the term or can it change during the investment term? Thanks Neil

Mike Heath: Neil The Cash Advantage Fund is very similar to a regular On Call deposit product, and therefore the interest rate paid is variable and there is no term – you can withdraw the monies whenever you wish with no penalty.

Reviewer: Olly

I Recently throught that the cash advantage funds would work out better than my on-call account with Rabo due to being able to be taxed at 19.5% pa because I was a student last year and hence on my savings account i'm charged at 33%pa due to current income . So i had equal amounts in Cash advantage funds an don-call account for one month and at the end of the month my savings account returned more can you explain how this works?

Mike Heath: Olly, thanks for the question. Without looking at your specific account details, and therefore commenting on them in a public domain, I think it’s best that someone from our Customer Contact Centre gets in touch with you directly – I shall pass your question to one of the team.

Reviewer: Kian

I have funds in savings accounts with my usual bank earmarked for different purposes which I would like to place in the Cash Advantage Fund. But there's no facility to set up sub-accounts (unlike Rabobank's savings accounts).

Mike Heath: Kian, thank you for the feedback.  This functionality does not currently feature on our list of planned enhancements, however I will ensure that it is added.

Reviewer: Olly

Hi I know the tax is paid at withdrawl or end of tax year with the Cash advantage fund. could you tell me that when I view my balance and it shows the net gain/loss does this take into account the loss of a withdrawl or will that only happen when I take from it

Mike Heath: Olly, The Profit/Loss figure will reflect interest earned for the existing units you hold in the Cash Advantage Fund. On the sale of units in the fund, interest earned for those particular units is no longer taken into account when calculating the Profit/Loss figure (subsequently you may see a decrease in the profit amount).

Reviewer: Victoria

Sorry ,where can I find price of CAF unit?

Mike Heath: Victoria, if you use the Fund Selector you’ll see there is a tab titled “Fund Prices”, under which you’ll see the unit price for the CAF and all other managed funds.  The Fund Selector can be found either on the home page (Under Popular Links – titled “Find a Fund”) or in the left hand navigation under Managed Funds, also titled “Find a Fund”.

Reviewer: Noel

Is the Cash Advantage Fund covered by Collective Investment Schemes and does it comply with the following clause on the reserve bank site they invest exclusively in New Zealand government securities or debt securities issued by institutions covered by the Crown guarantee; and they do not increase their investments in guaranteed institutions that are not registered banks beyond the level that existed as at 12 October 2008.

Mike Heath: Noel the answer is yes to the above questions, and I can advise you that we have lodged an application for the Cash Advantage Fund for the Deposit Guarantee Scheme.

Reviewer: Ada

Hi, your Cash Advantage Fund sounds really good, but can you please tell me what the risks are please??

Mike Heath: Ada the money is on deposit with Rabobank NZ and Rabobank NZ offers the following benefits to investors:

* Rabobank NZ has lodged an application for the recently announced Deposit Guarantee Scheme

* Rabobank has a AAA credit rating from Standard and Poor’s, and has held this for over 25 years

* Deposits with Rabobank NZ are guaranteed by group parent company Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland)

I’m sure you’ll agree that the above address any actual risks.

Reviewer: Amanda

Hi there, Are there any disadvantages for making withdrawals, or advantages for not withdrawing? I.e. bonus interest? Charges of any kind? Thanks

Mike Heath: Hi Amanda.  Tax is paid on the Cash Advantage Fund at the time you sell units (make a withdrawal) and at the end of the tax year.  If you sell units during the year, obviously interest only accrues from that point forward to the end of the tax year, based upon your remaining current balance/value.  If you do not sell any units during the year then no tax is paid until 31st March, and therefore you get the benefit of interest accruing on a greater balance – it’s a essentially the deferred tax benefit we have built into the Cash Advantage Fund.  I trust that makes sense.  Please refer to similar FAQs re the Cash Advantage Fund.

Reviewer: Tim

I'm still a bit uncertain on whether the Raboplus cash PIE is an eligible product for the deposit guarantee. Can you please verify. Thanks

Mike Heath: Tim I can confirm that all deposits, including investments in the Cash Advantage fund, are covered by the deposit scheme.

Reviewer: Rob

Hi Mike, Just to clarify the queries as to the Government's Bank Deposit Guarantee scheme in relation to the Cash Advantage Fund, can you confirm that funds invested would be classed as "debt securities issued by institutions covered by the Crown guarantee"? Thanks Rob

Mike Heath: Rob, yes I can confirm that investments in the Cash Advantage fund would be classed as "debt securities issued by institutions covered by the Crown guarantee" and would be covered by the deposit scheme.  Please refer to the RBNZ deposit guarantee FAQs.

Reviewer: Serena

Would deposits with RaboPlus be covered under government's deposit guarantee? And if RaboPlus chooses to participate, does PIE oncall Cash Fund be guaranteed the same way as the deposits?

Mike Heath: Serena, thanks for the questions.  Please see my comments to Phil's question below. 

Reviewer: Phil

I'm thinking of investing in the Cash Advantage Fund and can also see that you have applied to join the Government's Bank Deposit Guarantee scheme. As this is techinically a managed fund will the Government scheme cover funds invested in Cash Advantage? The RBNZ website doesn't give as concrete an answer as some investors may like on the question of cash PIEs.

Mike Heath: Phil Rabobank NZ have Opted-In to the recently announced deposit guarantee for all eligible products.  If you refer to the RBNZ’s FAQs on the guarantee you will see that they have made a direct reference to Cash PIEs.

Reviewer: Toddy

Im thinking of joining raboplus just cos of that dang fine lookn lass on those web banners! Do other banks have that!

Reviewer: Dylan

In your FAQ it states the below about AMP's role in the fund: Investment Manager (AMP Capital Investors (New Zealand) Limited) - Responsible for developing the investment strategy, setting the investment objectives and making the ongoing decisions relating to the asset allocation of the fund. What do you mean by this? The investment strategy is to invest 100% of the fund into a Rabo Cash account, the investment objectives are to invest 100% in a Rabo Cash account and the ongoing decisions revolve around keeping 100% in a Rabo Cash account. Why not just state that in order to offer a Rabo Cash account with PIE tax rates you needed to structure it through an Investment Manager and have an independent Trustee/Custodian? Any additional structure to a standard Rabo Cash account is there out of PIE necessity only is it not?

Mike Heath: Dylan, very good points.  The definition we have chosen for each party involved in the Cash Advantage Fund are generic i.e. they are typical to most funds.  The Cash Advantage Fund is a Managed Fund and as such requires the involvement of the parties stated.

Reviewer: Sandra

I understand that the cost of units in the CAF has risen to $2.50 due to interest paid on these investments. Is there a scenario whereby I could purchase units today at $2.50 but that they would be worth less in the future if I were to sell them? Thanks

Tim Carter: Sandra, the price fluctuations of a managed fund occur due to the performance of the underlying financial assets of the fund. For example, if a fund invests in shares or property these assets can potentially lose value and therefore drive the unit price down.
 
In the case of the Cash Advantage Fund the underlying financial asset is a cash deposit with Rabobank. The cash deposit has a stated, variable, interest return. As the fund accumulates the interest that is paid, the unit price increases accordingly. Therefore, the unit price will continue to increase as the fund earns interest. Even if the interest rate were to drop the unit price would still increase, albeit at a slower rate.

Reviewer: Vicki

Hi,I know it is avery complex problem but does CAF have any exposure to subprime debt etc?Is there a chance that CAF will have to "break the buck",i.e share will be worth less than $1.00

Mike Heath: Vicki, no it doesn’t. All monies invested in the CAF are on deposit with Rabobank NZ.

Reviewer: Johan

Hi, in these uncertain days I wonder if you would still maintain that a Cash fund is as safe as a simple savings account with RaboPlus for instance. Out of the blue we saw AIG in peril and this could happen to AMP as well. So why are you so sure that a CF is as safe as a regular account? thanks

Mike Heath: Johan, thanks for raising this. You are not the first to ask this question – in essence AMP have no recourse over the monies for the Cash Advantage Fund (CAF). These monies are all on deposit with Rabobank NZ, with our AAA credit rating for S&P, exactly the same as all of our deposit products. For a clearer understanding of who is involved in the CAF, and their respective roles, rights and responsibilities take a look at our FAQ – “Is there any potential default risk for the Cash Advantage Fund?”

Reviewer: Kyle

Hi there, Quick question- This page mentions that the effective rate for 39% tax payers is 9.61%. Can you please let me know what the effective interest rate is for 33% tax payers? Cheers

Mike Heath: Thanks for your question Kyle. The effective rate for a 33% tax payer is currently 8.80% p.a. Read more here on how the effective rate of return is calculated at different tax levels.

Reviewer: paw

If one is on a 19.5% tax rate It appear to me there is absolete no advantage what's ever by having a caf over a cash call a/c Please prove me wrong.

Mike Heath: There are a couple of advantages for people on 19.5% tax:

- Your funds compound daily with the Cash Advantage Fund (as opposed to monthly in a normal on call account).

- You can earn up to $60,000 and still pay only 19.5% tax on your deposits, so long as in either of the two preceding years your normal income has been $38,000 or less per annum and your total taxable income (including PIE income) is $60,000 or less. Also, for couples, you could potentially ‘double up’ and earn up to $120,000 and still pay only 19.5% tax. See our scenario above for a detailed example.

Reviewer: Ian

With respect, you did not answer Neil's question concerning the role AMP have in the CAF. To help, I'll rephrase his question. What conditions, if any, will cause AMP not to act immediately on a demand to repay the funds invested in the CAF? That is, can AMP cite market conditions as a refusal to return funds invested in the CAF. In an unlikely scenario where all retail depositors in the CAF demanded their money back, what happens? Can AMP refuse this request?

Mike Heath: Thanks Ian.  The decisive characteristics of the CAF are that all money invested in the CAF is deposited on call with the Rabobank parent company and the deposit held by an independent trustee (Guardian Trust).  Therefore, the only foreseeable circumstance in which AMP would not act immediately on demand to repay funds invested in the CAF is if Rabobank defaults in paying out from the CAF's deposit because the Rabobank group as a whole had failed.  And don't forget, Rabobank is AAA-rated by Standard & Poor's and Moody's and is regarded as one of the safest banks in the world.  AMP could not suspend payments on the basis of any general deterioration in market conditions.  The credit risk of an investment in the CAF is therefore the same as the credit risk of a deposit with Rabobank.  If all CAF investors demanded their money back, they would simply get their money (except, as I say, in the unforeseeable event that the Rabobank group had failed).  AMP could not withhold payment and would have no reason to do so.  The CAF is an entirely different fund to a property fund.  With a property fund, the delays involved in selling property (i.e. buildings etc) can cause problems meeting unforeseen levels of withdrawals and may require the manager to suspend withdrawals.

Reviewer: Sue

How does AMP make a buck from this? If there are no fees, who pays AMP for their management services?

Mike Heath: Sue Rabobank NZ pays, as opposed to the Cash Advantage Fund paying, AMP Capital Investors to act as fund manager for the Cash Advantage Fund. The fund does not pay any fees.

Reviewer: Andrew

Mike, can you please provide more detail as to the underlying assets in the Cash PIE. Specifically you say that money is lent to Food & Agriculture sector of NZ, can you provide information on loan duration, number of loans, whether there have been any defaults. Also what proportion of the portfolio is made up of these loans. The Morningstar fact sheet refers specifically to cash deposits as the investment vehicle, no mention of loans.

Mike Heath: Andrew there is only one underlying asset for the Cash Advantage Fund - deposits with Rabobank NZ. The comment re loans specific to the Food & Agri sector is a broader statement with regards to the all monies deposited (On-Call, Term and Cash Advantage Fund) with Rabobank NZ through RaboPlus.co.nz, and is not specific to the Cash Advantage Fund. RaboPlus.co.nz provides Rabobank NZ with a retail source of funding for it’s specialist lending activity in NZ’s Food & Agri sector.

Reviewer: nick

Excellent for trusts taxed at the draconian rate of 33% as well

Reviewer: Peter

How does Rabo make a buck from this - it must lend the money on to someone who pays more in interest than the investor is paid - which is fine, I do not have a problem with that. Who is this "borrower" (or what sector is he/she in) and I appreciate it will be not be one borrower, and what are the risks here - if any, but there must be some?

Mike Heath: The monies deposited with RaboPlus are, via our parent Rabobank NZ, lent to businesses in the Food & Agriculture sector of NZ.

Reviewer: Neil

Thanks Mike. I've now read your references. A simple yes/no question: is my money as secure in the Rabobank Cash Advantage Fund as in your standard online call accounts?

Mike Heath: Neil, Yes is the answer.

Reviewer: Neil

I am or was about to shift money into the Rabobank Cash Advantage Fund. AMP capital Investors manages this fund. However, the sudden freezing of funds by AMP Property Trust leaves me feeling I don't want to have AMP managing my funds. I also feel that this event taints Rabobank slightly by association. How valuable is a AAA rating when one's associates are freezing their funds? Of course the above is an uninformed reaction by a member of the public, but I think it is now probably incumbent on you to inform me and others as to why we should put our money into your PIE for preference.

Mike Heath: Neil, thanks for the question.  The decision by AMP Capital Investors to “freeze” their AMP Capital NZ Property Fund is specific to that fund.  For full details please review their customer advisory.  Please review our PIE FAQs for more information on the role AMP Capital Investors play for the Cash Advantage Fund.

Reviewer: Eric

Strange and tortuous application process for an online company. Even existing Rabobank customers have to endure 4 pages of AMP silliness, including involving an investment advisor, for what's essentially a term deposit by another name.

Reviewer: Dave

Is the Cash PIE going to be ready to deal with the new tax rates that apply from October? What is the effect of the new personal tax rates on the Cash PIE?

Mike Heath: Dave, thanks for the question, we shall prepare an FAQ this week to answer that question – thanks for raising it. 

Updated Answer 05/08/08

The new personal tax rates that apply from 1 October 2008 have had no effect on the Cash Advantage Fund. The Prescribed Investor Rate (PIR) determines the rate at which you are taxed.  At this point in time there has been no change to how the PIR is calculated which is the tax rate used by the Fund to calculate the tax payable on the income of the Fund that is attributed to you.  To determine your correct PIR please refer to the IRD website www.ird.govt.nz/toii/pir/ or contact your professional tax adviser.

Reviewer: diana

Can you please include in your demo above how the cash fund compares to Westpac Cash plus(also PIE)

Reviewer: Nanette

Do you have/are you going to offer a term deposit type cash PIE? The Cash Advantage Fund is good as far as it goes, but what about those who want the tax advantages, but also some certainty around the rate they recieve?

Mike Heath: Nanette, thanks for the question. This really is a hot topic at the moment and something we are paying a lot of attention to.  We are considering PIE TD(s) along with other innovations in the deposit arena. For obvious commercial reasons I can not say anymore than watch this space.

Reviewer: David Haynes

What is the typical spread between the buy and sell prices of the units in the PIE Cash Fund? If there is a spread then this will dilute the effective interest rate when money is withdrawn and so should be taken into account by Raboplus when publishing the interest rate.

Mike Heath: David, unlike some other managed funds, there is no Buy/Sell spread for the Cash Advantage Fund.

Reviewer: Gina

I'm impressed!, I hate lining up to get to a teller in banks, Raboplus made it so easy for me to open an account and have money going out of my nominated account(which I don't even notice) to grow gradually for a well earned break later. THANK YOU.

Reviewer: oscil8

This product is perfect as long as the government continues to smile on PIEs and the rate continues to be market leading. Can you please do a Kiwisaver version of this fund - with a clearly stated fixed rate and guaranteed no fees above what the government subsidises? BTW why do I feel so clean with my "significant other" but so dirty when dealing with banks and their impenetrable funds (and don't even get me started on financial advisers)? Based on your ads it should be the other way round :)

Reviewer: Les

Hi, can you tell me how frequently does the cash advantage rate get reviewed?

Mike Heath: Les, as is the case with our On Call and Term Deposits, there is no regular “review timetable”. We actively monitor the interest rate for the Cash Advantage Fund on a daily basis, and taking into account what’s happening in the market (wholesale interest rates, competitor activity, forecasts etc) we adjust the rate accordingly.

Reviewer: Bella

Thanks Mike - of course, that makes total sense! Sign me up...

Mike Heath: Bella, no problem. Actually looking at my example I forgot to take into account the compounding effect, and deferred tax advantages of the Cash Advantage Fund. So your original $1000, assuming you held all units for 12 months you would have more than the 8.30%p.a. I referred to previously.

Reviewer: Stephen

I cant understand how RaboPlus have compared this account to the standard online call account of kiwibanks. This is a PiE Account, so why dont they compare it to Kiwibanks PiE account which has effectively the same rates? One must compare apples with apples.

Mike Heath: Stephen, thanks for the feedback.  We shall update our comparisons accordingly.

Reviewer: Bella

Please correct me if I'm wrong, but is this not blatant false advertising (the claimed effective interest rate)? The calculation is based on the coupon rate on the FACE VALUE of the cash advantage fund. Given that it is a managed fund with a set amount of money the cost of getting in moves with the market (regardless of the fact the fund invests in cash). I looked to invest the other day, but it was going to cost $1.03 to buy a '$1' worth of cash, basically meaning I'd lose 3% of my capital on entry. This of course seriously effects the effective annual return. The return being advertised appears to only be true for people who bought when it listed last year for the $1 facevalue. It appears that investors are now paying a premium for the product. Someone please tell me if I'm wrong before I report the breach to the Commerce Commission. Thanks! ps giving 4 stars so gets on the board...

Mike Heath: Bella think of it more like a deposit account and how much money you’d have earned at the end of the period for which the money was invested. 

For example, and I’ll use the current rate of 8.30% to demonstrate my point, if someone $1,000 in the Cash Advantage Fund, when the fund was first launched, they would have received 1,000 units.  However in the context of your comment, assuming they didn’t buy or sell any units during the period, at the end of the 12 months their units would be worth $1,083 having earned 8.30% interest. 

If another investor came along some weeks later and also purchased $1,000 worth of units when the units were priced at $1.10 each, whilst they would only have purchased 909.09 units, at the end of 12 months, assuming they didn’t buy or sell any units during the period, their units would still be worth $1,083 i.e. having also earned 8.30% interest. 

The key way to look at it is exactly as you would a term deposit.  It’s all about how much that deposit grows over the period, as opposed to the number of units.  Your initial investment remains the same. I trust this makes sense.

Reviewer: Craig Stewart

All the on-line info on the Rabo website says that this fund "compounds daily". That is, in fact, not correct. It compounds Monday through to Thursday. Simple interest is paid Friday through to Sunday, then it goes back to compounding again. I think Rabo should make this clear - as it stands, it is misleading.

Mike Heath: Craig, thanks for the feedback. We'll review our information and amend appropriately.

Reviewer: Jaron

Mike, the other advantage over a traditional on call savings account that many forget, is that the interest is compounding DAILY rather than monthly - so even if you are on a 19.5% tax rate there are still significant savings with your significant other!

Reviewer: Mike

George: If your on 19.5% tax rate, I don't think there is any tax advantage in the Cash Advantage Fund. Also the cash advantage fund rate is currently at 8.25% while an on call savings account is higher at 8.35%

Reviewer: Sam

The effective interest rate is certainly impressive - 9.85%!! Tied in with the low risk, minimum deposit amount and the funds being on-call it is the most appealing Managed Fund product you have on offer! I just wish I was on 39% tax.

Reviewer: Jaron

Brian, get over your breech... $1 is needed to open your account, you can hardly call it a fee as it's your money and you'll see it sitting safely in your account. You couldn't call it a fund if it had nothing in it could you!

Reviewer: George

I am on 19.5& tax. What means the Cash Advantage Fund to me?

Mike Heath: Hi George, there are couple of significant benefits for those on a 19.5% tax rate.  Firstly they can earn up to $60,000 and still pay only 19.5% tax on your deposits, so long as in either of the two preceding years your normal income has been $38,000 or less per annum and your total taxable income (including PIE income) is $60,000 or less.  Also, for couples, you could potentially ‘double up’ and earn up to $120,000 and still pay only 19.5% tax.

Reviewer: Brian

The cash advantage fund is advertised as feee free. However, I have noticed there is a minimal entry/exit fee of just of $1. Yes, it a minor issue- however still a breach.