First finance company PIE fund

UDC is the first finance company in New Zealand to roll out PIE-compliant funds. It has launched one which offers investors 12 month terms and the other is a cash fund.

UDC head of finance and investments, Bruce Andeerson, says once the company got its head around the new tax rules, making the funds was not too difficult.

He guesses that UDC could be the first finance company to offer a PIE fund as others are "distracted by other issues."

The term fund, known as the Maximiser, offers 12-month terms, however investments can only be made on the first of each month.

Its opening rate is 9%, which equates to an equivalent of 10.68% for people on 39% tax rates.

Anderson says the funds appeal to various audiences, however he thinks that they suit advisers, rather than being sold directly to investors.

He says they require a little more explaining than a traditional term deposit or finance company debenture.

"Ideally they will be sold on a face-to-face conversation."

He says the fund competes with finance companies and term deposits as well as the cash PIEs being promoted by banks at present.

His view is that the Maximiser fund has an advantage in that its return is known and is set at a fixed rate for 12 months. Cash PIEs, he says, don't offer certainty of returns and their rates will fluctuate.

UDC has a cash PIE too which is offering a rate of 8.25%. Both funds invest in UDC debentures. While the PIE funds don't have a Standard and Poor's rating UDC does.

What is it called and what sort of savings product is it?
UDC Finance's Term Maximiser Fund is a managed fund under the new portfolio investment entity (PIE) tax rules.

What is the company behind it?
UDC is a subsidiary of the ANZ National Bank. It is New Zealand's largest finance company, and lends solely on plant and machinery.

Who is the target market?
UDC says it suits people in retirement, nearing retirement or saving for a particular goal.

What return does it offer?
Its opening rate is 9% annually, with interest paid quarterly. For investors on a 39% marginal tax rate, this is the equivalent of 10.68% under the PIE regime.