PIE vs Regular Term Deposits: Which is Better?
When choosing a term deposit in New Zealand, one of the most important decisions is whether to go with a PIE (Portfolio Investment Entity) or a regular (non-PIE) option. The right choice depends on your personal tax situation.
What is a PIE Term Deposit?
A PIE term deposit is structured as a Portfolio Investment Entity fund. Instead of being taxed at your marginal tax rate, earnings are taxed at your Prescribed Investor Rate (PIR).
Understanding Tax Rates
Regular Term Deposit Tax (RWT)
Interest from regular term deposits is taxed at Resident Withholding Tax (RWT) rates:
- 10.5% - Income up to $14,000
- 17.5% - Income $14,001 to $48,000
- 30% - Income $48,001 to $70,000
- 33% - Income $70,001 to $180,000
- 39% - Income over $180,000
PIE Term Deposit Tax (PIR)
PIE funds are taxed at your Prescribed Investor Rate:
- 10.5% - Income up to $14,000
- 17.5% - Income $14,001 to $48,000
- 28% - Income over $48,000 (capped!)
Key Advantage
The maximum PIR is 28%, compared to up to 39% for regular deposits. If you earn over $48,000, PIE term deposits will save you tax.
Example Comparison
Let's compare a $50,000 term deposit at 5.5% for someone earning $80,000:
| Type | Gross Interest | Tax Rate | Tax | Net Return |
|---|---|---|---|---|
| Regular TD | $2,750 | 33% | $907.50 | $1,842.50 |
| PIE TD | $2,750 | 28% | $770.00 | $1,980.00 |
Saving with PIE: $137.50 per year
Who Offers PIE Term Deposits?
Not all banks offer PIE term deposits. Key providers include:
When to Choose Regular Term Deposits
Regular term deposits may be better if:
- Your income is under $48,000 (same tax rate)
- You want more provider options
- You prefer simpler tax reporting
When to Choose PIE Term Deposits
PIE term deposits are usually better if:
- Your income is over $48,000
- You're in the 33% or 39% tax bracket
- You want to minimize tax on investment income
Calculate Your Returns
Use our calculator to compare potential returns from different term deposits.
Try Calculator