Benefit funds and some superannuation scheme portfolio investment entities (PIEs) help investors save for the long-term or retirement. They do not attribute income to investors, and funds are locked in until a set future date.
This is different from most KiwiSaver providers, where investors are taxed at their prescribed investor rate (PIR).
Becoming a benefit fund PIE
To register as a benefit fund PIE, you must:
- be a defined benefit fund or scheme, or a superannuation or retirement savings scheme that meets the requirements of the Financial Markets Conduct Act 2013
- not attribute income to your investors
- meet the PIE eligibility requirements.
Eligibility to be a portfolio investment entity
Tax advantages and requirements
These types of PIEs offer a defined return on maturity rather than building up income each year over the policy term.
They can help investors save for the long-term by making it hard to access investment funds until the investor has reached retirement age.
Benefit fund PIEs need to file income tax returns every year and are taxed at the basic income tax rate that applies to the fund.
Hybrid funds
Benefit funds can also be contribution funds. These are called hybrid funds.
Hybrid funds split their benefit fund and contribution fund. This creates 2 investor classes.
The benefit fund side treats its income as kept by the PIE and is taxed at 28%.
The contribution side can be treated as a multi-rate PIE.