It’s the comparison every NZ investor makes at some point: should I keep my money in a safe bank term deposit, or move it into a PIE fund for potentially better returns? The answer depends on your tax bracket, risk tolerance, and income needs.
The single biggest differentiator between PIE funds and term deposits isn’t the gross return — it’s the tax treatment. Term deposit interest is taxed at your marginal income tax rate (up to 39%). PIE fund returns are taxed at your Prescribed Investor Rate (PIR), capped at 28%.
For someone earning over $180,000, that’s an 11% tax saving on every dollar of investment income.
| Term Deposit | PIE Fund (e.g. Blossum) | |
|---|---|---|
| Gross Return | 4.5% – 5.5% | 8% p.a. |
| Tax Rate (high earner) | 33% – 39% | 28% (PIR cap) |
| After-Tax Return ($180k+ earner) | 2.7% – 3.4% | 5.76% |
| Income Frequency | At maturity | Monthly |
| Security | Bank balance sheet | First-mortgage property |
| Government Guarantee | No (for amounts over $100k) | No |
| Tax Return Required | Yes | No (for most investors) |
| Minimum | $1,000+ | Varies (wholesale eligibility) |
Let’s see the difference on a $300,000 investment for a taxpayer on the 39% marginal rate:
| Metric | Term Deposit (5%) | Blossum PIE (8%) |
|---|---|---|
| Annual Gross Income | $15,000 | $24,000 |
| Tax Paid | $5,850 (39%) | $6,720 (28%) |
| After-Tax Income | $9,150 | $17,280 |
| Monthly Cash in Hand | $762 | $1,440 |
That’s an extra $8,130 per year — or $678 per month — by choosing a property secured PIE fund over a term deposit.
For investors in the 33% or 39% tax brackets, PIE funds typically deliver significantly better after-tax returns due to the 28% PIR cap. A term deposit at 5% nets 3.05% after 39% tax. A PIE fund at 8% nets 5.76% after 28% PIR — nearly double the after-tax income.
Risk varies by fund type. Property-secured PIE funds like Blossum have tangible collateral (max 75% LVR), providing meaningful asset backing. However, they don’t carry the same perceived simplicity as bank deposits. Neither term deposits nor PIE funds have unlimited government guarantees in NZ.
Yes. When your term deposit matures, you can redirect the funds into a PIE fund. If you qualify as a wholesale investor, property secured PIE funds like Blossum offer 8% p.a. with monthly distributions and PIE tax benefits.
Switch from term deposits to Blossum’s 8% property secured PIE fund.
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