The funds management industry needs to get on the front foot and better communicate the advantages of investing in a PIE, say industry players.
Yesterday marked the first full financial year of the Portfolio Investment Entity regime, which delivers tax advantages to investors on the top tax rates.
PIE investors
will be getting their first full-year PIE tax statements and will clearly see the benefits, says Anthony Edmonds, head of sales and marketing at AMP Capital.
The top PIE tax rate is just 30 per cent, meaning investors who would otherwise be taxed at 33 or 38 per cent get a break.
"Those on the top tax rates would have to have rocks in their heads not to invest in PIE funds," Edmonds said.
But he said while PIE funds had taken off, there was less understanding that funds investing in other asset classes provided the same benefits. "It's happening at a consumer level through the bank PIEs on offer."
Martin Lewington, managing director of Mercer New Zealand, said unfortunately some investors would be getting their statements and be more concerned about the red ink they saw.
"There's going to be some pretty - there's no other word for it - horrific returns in some of the asset classes."
In addition, under the new Fair Dividend Rate regime some would end up paying tax on their share portfolios despite their performance.
In the face of all that the industry needed to get proactive in communicating the advantages of PIE funds - the tax benefits, but also the diversification they offered and the fact that an active fund manager could add value above the official cash rate.
