DRP · reinvestment
Distribution reinvestment plan (DRP)
A standing election that automatically reinvests cash distributions back into the fund's units rather than paying them out. Default on most NZ retail accumulation-style PIE funds.
A distribution reinvestment plan (DRP) is a standing election by an investor that any cash distribution the fund pays is automatically used to buy more units in the same fund rather than being paid out to the investor's bank account. The reinvestment usually happens at the next unit-price strike after the distribution and is settled without the investor needing to act.
DRPs are the default election on most NZ retail PIE-structured managed funds that offer distribution units, and are the only option on accumulation-style PIE funds, which never pay cash distributions at all. The election can usually be changed via the manager's online account portal.
For NZ tax purposes a DRP does not change the timing or amount of PIE tax — the PIE attributes income whether or not it is distributed, and tax is paid at the investor's PIR. A DRP affects only the cash-versus-units form in which the after-tax distribution is received.
Related terms
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distribution-yield
Distribution yield
The cash income a fund has distributed to unit holders over the past 12 months, expressed as a percentage of the current unit price. Distinct from total return.
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accumulation-units
Accumulation vs distribution units
Accumulation units reinvest income inside the unit price. Distribution units pay income out as cash and the unit price reflects capital only.
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PIR
Prescribed Investor Rate (PIR)
The tax rate applied to your share of a PIE fund's taxable income. NZ has three PIRs for resident individuals — 10.5%, 17.5% and 28% — chosen using a two-year look-back of taxable + PIE income.