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Thread: What is a PIE account?

  1. #1
    Join Date
    Jun 2015
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    UK->CA->NZ
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    Default What is a PIE account?

    I bank with Kiwibank and notice that it has a 30 days Notice Saver which offers good interest rate. https://www.kiwibank.co.nz/personal-...s/notice-saver However, it states that it is a PIE account. How is it different from a normal term deposit? Just want to make sure that the money I put into the Notice Saver is safe, not in some risky investment.

  2. #2
    Join Date
    Aug 2005
    Location
    West Auckland
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    Default

    PIE accounts have different rules about how much tax you pay on the interest you earn. There's a "more about PIEs" link on the page you linked to, and more info here: https://www.ird.govt.nz/toii/pie/ind...als-index.html

    So far as I can see, the difference between the Notice Saver and a regular term deposit is that the Notice Saver doesn't have a fixed term. I personally wouldn't be worried about the safety of the PIE account, or any investment account with a big bank - if a bank like Kiwibank goes under, we'll have much bigger problems to worry about!

  3. #3
    Join Date
    Jan 2007
    Location
    Chch, NZ
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    2,220

    Default

    Your normal term deposit, the bank is issuing the payment of interest on the deposit (you're dealing with the bank). In a PIE investment, you're lending to a 3rd party (not the bank directly but a managed 'Fund') that will invest for you. The distinction and marketing ploy on PIE is the overall tax with a PIE investment is lower tax of 0.25% or less depending on your marginal income bracket vs if you invested in a term deposit, the tax with-holding % would be in the tax bracket you're in.

    For fixed income investments, there's not a lot to worry about the difference. The real problem with PIE is when invested in equities (shareholdings of companies) as under PIE, these managed fund re required to pay the FDR 5% tax EVEN ON YEARS THAT ARE NEGATIVE RETURN.

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