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Getting a better investment return - easy as PIE

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Fuseworks Media
Fuseworks Media

Cash Portfolio Investment Entities (PIEs) are typically not a consumer's first choice for savings, however, they allow investors to take advantage of special tax rules to boost the returns they receive on their savings, without losing the flexibility to access their money.

Cash PIEs are similar to on-call savings accounts where the account-holder can make deposits and withdrawals while earning interest on any balances. However what differentiates Cash PIE from other savings accounts is that tax is capped at 28%.

"Investors in higher tax brackets are missing out on a better rate of return if they are not utilising these accounts" CANSTAR NZ National Manager Derek Bonnar said.

"For example, if the advertised interest rate is 3%, a 30% tax payer gets an effective rate of 3.11% and a 33% taxpayer 3.25% - that additional return adds up."

Cash PIEs were introduced in 2007 by the banks to take advantage of changes to the portfolio entity rules. They allow investors in the high marginal tax brackets to effectively cap the tax they pay on their interest at 28%.

"Investors are not disadvantaged with the rate either, as most products offer rates which are competitive with equivalent savings accounts."

CANSTAR NZ recently researched and compared Cash PIE accounts to determine those Funds offering five-star value. Two profiles were rated to recognise the different savings behaviour of consumers - active saver and investor.

"We used two profiles to distinguish different savings behaviour," Mr Bonnar said.

"An investor who sets and forgets and an active saver profile who deposits and withdraws on a regular basis.

"We researched both the interest rate being paid and over 40 features of each PIE to determine which fund provides the best value to consumers."

Mr Bonnar said Cash PIE providers that stood out include MAS (Medical Assurance Society NZ Limited) which received five stars in both the active saver and investor profile. Whilst MAS products are generally targeted towards particular professions, MAS will accept investments from all consumers. Other five star winners include RaboDirect in the active saver profile and TSB in the investor profile.

"These organisations deserve to be congratulated for offering New Zealanders an impressive range of competitively priced and well-featured products across all profiles," Mr Bonnar said.

The full Cash PIE star ratings report can be downloaded at www.canstar.co.nz

Cash PIEs are just one of a number of new ratings CANSTAR has introduced in recent months and plans are afoot for further expansion in the New Year.

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