What’s under the bonnet

Kiwis are understandably nervous about the safety of their savings. Many a saver in the past decade has seen money disappear into thin air after investing in a finance company debenture or other risky investment.

Despite their slightly complex-sounding names, the majority of Cash PIEs place investors’ money in cash deposits with high street banks. That makes them relatively safe things to invest in. That doesn’t mean savers should presume their Cash PIE money is “in the bank”.

In most cases it’s true that the money is quite literally in the bank. For example, the BNZ Cash PIE invests all of its money directly in BNZ deposits.

On the other hand Forsyth Bar’s Cash PIE invests in debt securities from Westpac and HSBC. These are relatively safe investments, but not quite as safe as cash deposits.

Another example is Guardian Trust, which invests its Cash PIE money in “cash and cash-equivalent instruments”. That means investments “which can be converted into cash quickly and include deposits with banks, bank bills, New Zealand government bills and bonds, local government bills and bonds”.

All but two of the Cash PIEs rated by CANSTAR take the bank deposit route. There may be more in the future that choose to put some of the money into these less straightforward assets in order to boost the returns.

If you want to know more about a Cash PIE it’s necessary to ask for the investment statement. Beware, however, investment statements can run to 20 pages or more of legalese and are far more difficult to understand than the one or two page terms and conditions of a bank account.

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