Ben Kelleher, managing director retail and business banking at the ANZ, said low interest rates had reduced the investment returns of the scheme affecting the size of its prize pool.
"It has now become apparent those trends are likely to continue in the medium term. The Official Cash Rate, currently at a historically low 0.25 per cent, may fall further in early 2021 as the global economy grapples with the impacts of Covid-19.
"The ANZIS [ANZ Investment Services] Board decided it is no longer appropriate to accept new investment into Bonus Bonds with immediate effect, and intends to start winding up the scheme no later than the end of October."
Winding up the scheme will mean money is returned to bondholders.
Last year the New Zealand Herald reported that bonus bonds were in the sights of the financial watchdog the Financial Markets Authority as part of its work around legacy products that may no longer be suitable for investors.
The FMA's response came after the Herald queried the regulator over complaints and concerns about Bonus Bonus after revealing an ANZ staffer had written to the bank's chief executive and board concerned about the product and calling it the "biggest rort in financial services in New Zealand" and asking for the fees to be cut.
ANZ cut the fees on Bonus Bonds in July from 1.15 per cent to 0.88 per cent but said it made the decision to do so before receiving the anonymous letter from the employee.
There is around $3.25 billion invested in Bonus Bonds which is managed by ANZ Investment Services - a subsidiary of ANZ bank.
Instead of getting interest on their investments savers go into a monthly draw to win a prize of up to $1 million but the odds of winning a prize are low and have been getting worse.
The latest annual report says the average odds were one in 32,294 of winning a prize in any given month, down from one in 26,875 in its 2018 financial year.
Around 1.3 million Kiwis have bond bonds. They were launched by the New Zealand Government through the Post Office in 1970.
ANZ's Kelleher said it intended to still hold the September and October prize draws as scheduled and customers could continue to redeem their Bonus Bonds until winding up starts.
"However, ANZIS might move to an earlier wind up, for example, if there is a heavy demand for redemptions or it otherwise considers it is in the overall best interests of investors to do so."
Kelleher said investors had two choices.
"They can redeem their Bonus Bonds before the scheme starts to wind up, or stay in the scheme and be entitled to a share of the remaining reserves, after expenses, when the scheme is wound up," he said.
"Those who choose to stay during the wind-up phase will have their investments locked in during this process, which may take up to 12 months.
"The board believes current reserves are sufficient for bondholders to be confident they will receive back their initial investment. The reserves represent the surplus of the value of assets in the scheme over the claims of bondholders."
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I've had over ($)20,000 in bonus bonds for over 10 years, and worked out that I was getting less that a 1% return pa.!! (never more than $20 once every few months). I have always looked at this as being a big cash cow for ANZ, so now, when I see above, that they have around $3.25 billion invested in Bonus Bonds, that just proves it. I will probably leave them there until the windup in October, but am a bit confused by, "Those who choose to stay during the wind-up phase will have their investments locked in during this process, which may take up to 12 months". Does this then mean that I will not be able to retrieve my bonds for 12 months after October? Anyone? And just imagine the interest they will still reap if that is the case..
Why would you be surprised that one of Australias big four banks would lock your money away for 12 months? Australia had a royal commision into these banks which uncovered rort after rort and many dubious banking practises that benefit the bank always before benefiting the customer. People should only deal with these banks with their eyes fully open and with an expectation that the bank will sting them every chance they get.
I know, and the Oz commission should have extended their inquiry into the Banks lucrative NZ practices. So, I guess that I will now cash in after the September draw, and transfer the balance into my loyal Kiwibank account..
And for an ANZ staffer, to describe it as the, "biggest rort in financial services in New Zealand" only to fall on deaf ears, reveals the Fat-cat 'corruption' within the (nz) banking system. Oh well, it was fun while it lasted, and still better odds than lotto.
ozzzy3, how do you figure the odds for Bonus Bonds are better than for NZ Lotto? The odds of winning the (minimum) $1 million powerball prize is 1 in 38.3 million. With the (fixed) $1 million first prize in Bonus Bonds each month and there being 3.25 billion "tickets" that makes your chances at winning just 1 in 3250 million; some 80 times worse than Lotto.
It would appear that others agree with my quick odds calculation as newshub covered bonus bonds odds in September of last year. They put the odds of winning the maximum $1 million first prize at better than I do; only 1 in 3.1 billion. Moneyhub covered Bonus Bonds in January of last year and they also place the odds of winning the first prize to be just 1 in 3.4 billion.
David-M. Sorry, that was calculated on my own 22,000+ bonds. So my odds were better than if I had just 1 bond.
P.S. Dave. 'Around 1.3 million Kiwis have bond bonds'. So technically you may have a 1 in 1.3 million chance of winning the $1m, if you have multiple bonds, which most would. The minimum purchase is 20 bonds. I'm no mathematician, but still a long shot.
Watch this space from October and I bet hardly anyone will get their money back. The bank will find excuse after excuse to not pay out to anyone. Just watch how the bank will keep winning, just another rip off on the way.
"Those who choose to stay during the wind-up phase will have their investments 'locked in' (is that code for frozen?) during this process, which may take up to 12 months".
That alone sounds illegal, and likely won't generate any interest for the account holder either...
"The board believes current reserves are sufficient for bondholders to be confident they will receive back their initial investment. The reserves represent the surplus of the value of assets in the scheme over the claims of bondholders."
I don't speak bank, but that seems to be an admission that even with the interest or reserves they have in BB's, is enough to cover the Bondholders claims (sorry, kind of rambling) So why make people wait 12 months. No doubt they have been enjoying 10%+ since 1970..