Investment Options in New Zealand: How Do They Stack Up to ISAs?
New Zealand doesn’t mirror the UK’s Individual Savings Accounts (ISAs), which shield up to £20,000 annually from taxes on gains, dividends, and interest. With no broad capital gains tax in NZ (except for cases like property flipping), the investment landscape shifts—but strong alternatives exist.
KiwiSaver: A Solid Base
KiwiSaver, NZ’s voluntary retirement scheme, welcomes citizens, residents, and some visa holders—not just permanent employees. Contribute 3% of your salary—or more, or less if self-employed or not working—and employers often match 3% for those in jobs. The government adds up to $521.43 yearly if you hit $1,042.86. Funds lock until age 65 (barring first-home withdrawals), and growth is free of capital gains tax, a benefit baked into NZ’s tax system. For workers, a 3% contribution can hit 6% with employer input.
Beyond KiwiSaver: PIEs and Evidence-Based Funds
New Zealand’s lack of broad capital gains tax (except for cases like property flipping) boosts regular funds and shares—no special wrapper needed. Portfolio Investment Entities (PIEs) add tax perks: capital gains escape tax, while income (e.g., dividends) is taxed at your Prescribed Investor Rate (max 28%), often below personal rates. Unlike ISAs, there’s no contribution limit, though it’s not a full tax shelter. A cornerstone of most clients portfolio are evidence based funds that we have discussed at length in other articles and you tube videos. They have delivered 10% annual returns after fees and tax over the long term— approximately 2% per year above market indices. Over decades, that edge triples the money in your investment pot compared to what you would get from a basic index. Of course past returns are no guarantee of future returns , but a good investment process should demonstrate strong performance over the long term. We seek to put 3-4 investment processes together that are proven to work, and then stick with them.
A Practical Mix
A blend of 3% of your income to KiwiSaver (if enrolled) and 5% to non-KiwiSaver funds often is enough in the retirement projections we run for clients. Self-employed or late starters might tweak higher.
Transferring an ISA—or a UK Pension?
Relocated to NZ with a UK ISA? Many of our clients have moved their ISA to local funds to enjoy a more streamlined and localised approach.
Also consider transferring a private UK pension—NZ’s tax rules and fund options might align better with your goals, but seek specialist advice to weigh up the pros and cons.