Investing isn’t just about what you grow, it is also about how you grow it. The right investment structure creates a controlled environment that nurtures performance while shielding against unnecessary losses.
In New Zealand, one of the most effective structures for achieving tax-efficient investment growth is through a Portfolio Investment Entity (PIE) fund. PIEs function much like a greenhouse for your investments, allowing the right elements in, keeping unnecessary exposure out, and creating conditions that help your portfolio thrive.
What is a PIE Fund?
A PIE fund is a managed investment fund that pools money from multiple investors to buy a mix of assets – such as shares, bonds, cash or property. But what makes it unique is its framework. Much like a greenhouse moderates temperature and exposure, a PIE moderates tax impact, allowing investors – particularly those in higher tax brackets – to grow their wealth under more favourable conditions.
Why the structure matters
For high-income or growth-focused investors, traditional investment structures can expose returns to unnecessary tax erosion. PIEs change that. They are specifically designed to cap tax at your Prescribed Investor Rate (PIR), which ranges from 10.5% to 28%, depending on your income.
PIE funds can provide an immediate tax efficiency advantage for investors on a 30%, 33% or 39% personal income tax rate.
How PIEs protect and optimise
PIE Funds offer a number of features that help your portfolio operate in a more tax-efficient environment:
- Capped tax rates: the PIR system limits the tax you pay on investment income to a maximum of 28%, even if your marginal income tax rate is higher
- Internal tax management: the fund takes care of tax calculations and payments, simplifying reporting and reducing end-of-year administration
- Tax isolation: unlike some other vehicles, PIE income is generally not included in your personal income tax return (if your PIR is set correctly), preserving eligibility for certain benefits or thresholds
- Reinvestment advantage: by reducing tax friction, more of your income stays in the funds and compounds over time
Who benefits most?
PIEs are suitable for many types of investors, but the tax efficiency is especially valuable for those earning over $180,000. For these investors, reducing tax on investment income from 33%-39% down to 28% can deliver significant savings annually.
PIEs are also highly effective within:
- Retirement income portfolios
- Trusts and estate planning structures
- Cash or term-deposit alternatives for high balances
Regardless of your tax bracket, investors benefit from the tax isolation and reinvestment advantages through the PIE structure.
Consider the role of PIE funds in your investment strategy
Whether you are reviewing an existing portfolio or building a new strategy, understanding how PIEs fit into your investment strategy can make a meaningful difference. A PIE fund can provide a protected and optimised space for your investments to grow – shielded from excessive taxation and administrative complexity.
30 June 2025
By Brittany Jackson, Financial Adviser
CP Wealth