Sep 202014
 

IG, one of the best-known spreadbetting and CFD providers, has branched out with a new execution-only stockbroking service. At present, the firm offers dealing in stocks listed in the UK, USA, Germany, Ireland and the Netherlands, with other international markets likely to be added in the future.

I’ve added a page with details of charges to the broker directory and also included it in the execution-only and international broker comparison tables. Overall, it appears to be a competitively priced service with a handful of particularly notable points: Continue reading »

May 032014
 

The proposed changes to UK pension rules announced in the March 2014 Budget will make Self-Invested Personal Pensions (SIPPs) far more flexible. From April 2015, investors should be able to withdraw as much of their SIPP fund as they want immediately on retirement.

Since the choice between a SIPP and an Individual Savings Account (ISA) is a trade off between flexibility and tax relief, many investors will feel that this tips the balance in favour of SIPPs. But while the changes are welcome, I think it makes less difference than you’d expect.

Unlike some finance writers that I generally agree with (this piece on Monevator, for example), I think that the practical advantages of SIPPs over ISAs are easy to overstate. To see why, let’s look at how much the added tax relief from a SIPP is really worth for the average investor. Continue reading »

Oct 302013
 

Update 04/01/2014: I’ve done a small update on this article to reflect AJ Bell Youinvest/Sippdeal’s increased FX costs and Alliance Trust Savings’ increased ISA fee.

 Update 30/11/2013: Sippdeal has announced an increased FX fee (as well as rebranding as AJ Bell Youinvest) – see this post for more. I’ll update the comparison table when I have more details, but it looks like it will no longer be the cheapest option, although the lack of an ISA admin fee should still make it one of the cheapest for smaller ISAs. For now, adding £57.6 to the figures below should give you the estimated annual cost under the new charges.

Since quite a few UK stockbrokers have changed their fees over the past year, I’ve updated my calculations for the cheapest ISAs for buying international stocks.

Full details of charges, changes and costs are listed in the tables below, but the main conclusions are:

  • Sippdeal now appears to be the cheapest for dealing in foreign stocks that can be traded as CREST Depository Interests (ie major US, Canadian and European companies). It also offers some other markets that can’t be settled in CREST, although these will be more expensive.
  • The main caveat to this whether Sippdeal’s current pricing structure – no account fees, no inactivity fees and no custody charges for CREST-settled stocks – can continue in the post-RDR world. I would not be surprised to see some kind of account fees come in over the next year or so, but I would expect the firm to remain one of the most cost-effective.
  • iDealing comes in as only slightly more expensive than Sippdeal, due solely to the annual account fee it charges. It does not offer the non-CDI markets that Sippdeal offers, making it a slightly less flexible option.
  • Following AJ Bell Youinvest’s increase in FX commissions to 1% (from 0.5% or less – depending on deal size – previously), it no longer offers such a cheap service and is now beaten by iDealing. Youinvest offers a a wider range of markets (ie the ability to access some non-CREST markets – iDealing may be willing to deal in some other markets on request, but is likely to require fairly large deal sizes), still remains one of the cheapest options and gets consistently good feedback for customer service, but can no longer be said to be the standout choice.
  • Saxo Bank (or Saxo Capital Markets as it’s gradually rebranding itself) is relatively cheap, but has restructured its ISA service since last year. The mass-market Modern Wealth Management offering has closed down, to be replaced by an ISA offering on the main Saxo Trader platform. This offers more markets but carries a high £50,000 minimum account size for an ISA (the regular Saxo trading account still requires a lower minimum of £5,000 in the UK)
  • Very broadly, holding US and European shares in an ISA can make sense for most investors using the cheapest brokers, but holding shares from other markets will arguably only be cost effective for larger investors. Continue reading »
Dec 192012
 

Slight delay on updating this due to other commitments, but Saxo announced new fees for its UK Modern Wealth Management service, all of which seem to be in the client’s favour. The main changes are:

  • The waiver of commission on currency conversion for international trades has been made permanent. Any FX mark-up near 0% is rare, so this makes it extremely competitive, with the only downside being that the MWM platform only has a limited range of international markets (the new rates do not apply to Saxo Trader). In particular, it’s good for anyone who wants to hold overseas stocks in an ISA, since Saxo’s new rates make it one of the cheapest ISAs for foreign stocks around.
  • The annual fee of £35 has been removed for regular investment accounts and only applies to ISAs.
  • The fund supermarket has become more competitive – it’s now on an RDR compliant basis and will now return all trail and platform commission to investors. Saxo will charge an annual custody fee of 0.5% on fund holdings, although this is being waived until January 2014. It’s hard to know how competitive 0.5% will look in a year’s time, since most of the supermarkets have not yet announced their post-RDR pricing, but I’d guess it will be mid-tier – other firms such as Cavendish will probably be cheaper. Still, Saxo is for now a much more serious contender as a fund supermarket than it was, so I’ve added it to the fund supermarket table for the time being.

Overally, good to see a firm lowering costs and a contrast to TD Direct Investing’s changes the other day.

Oct 202012
 

Update October 2013: There is now a new version of this comparison incorporating changes to brokers’ fees over the past year. See Best ISAs for International Stocks October 2013.

Update March 2013: Saxo Bank is closing the Modern Wealth Management service and introducing an ISA wrapper on its Saxo Trader platform. This seems likely to work out slightly more expensive than the Modern Wealth Management example below, but will apparently allow access to a much wider range of exchanges. The comparison table will be updated once I have full details of the revised service.

[Updated again on 06/11/2012 to include estimated costs for Interactive Investor and again on 19/12/2012 to reflect Saxo Bank’s new pricing for Modern Wealth Management]

I’ve updated the tables from the Best ISAs for international stocks post from April to reflect a few fee changes and include a new broker. Some changes and key points are:

  • iWeb has cut its dealing fee to £5 per trade. On the downside, its foreign exchange margin is scheduled to increase to 1.5% in April 2013, which will make it significantly more expensive. The figures in the table are based on the current margin, but estimates based on the increased margin are included in the footnotes.
  • Sippdeal has recently been added to the broker database and added to the tables for the first time. I wasn’t aware of this firm’s international offering until recently – all told, the cost structure looks very competitive if you want to trade in CREST-settled foreign stocks.
  • The figures for iDealing have been changed to be based on a 0.5% foreign exchange margin. Like Sippdeal, iDealing passes on the market maker’s FX commission without adding its own – the firm has previously told me that 0.25% was a typical mark-up, but based on figures from Sippdeal and elsewhere, I think this is probably too low for the relatively small deals I’m factoring into the table, so have adjusted it for this example.
  • Admin fees/inactivity fees for Alliance Trust, Halifax and Selftrade have changed slightly since the last update, although this has had relatively little impact on their overall competitiveness.
  • The estimate for Saxo Modern Wealth Management is based on its scheduled 0.5% regular FX charge rather than the introductory offer of no FX mark-up.  Saxo has now made the 0% FX charge its permanent rate, so the figures have been updated – this makes it look extremely competitive, albeit for a limited range of markets. Continue reading »
Oct 062012
 

Since the Saxo Modern Wealth Management platform for UK long-term investors is rather different to the Saxo Bank platform, it now has its own entry in the broker directory. There are also a few updates to the details of the service from the summary when it first launched in April 2012.

  • Saxo has confirmed that the currency conversion fee is 0.5% over interbank rates, not 1.5%, and that this is being waived until mid 2013. Am not sure if this was an error in the original charges sheet or a decision to bring it down to match the standard Saxo Bank rates. Regardless, it is now far more competitive, making its ISA (which is only available through Modern Wealth Management rather than the Saxo Bank service) look like one of the more cost-effective ones for holding foreign stocks. Continue reading »
Apr 232012
 

[Update 06/10/12: Modern Wealth Management FX charge is confirmed to be 0.5%, in line with the regular Saxo account, not 1.5% (and is being waived until mid 2013) – not clear if this was an error in the original charges sheet or has subsequently been changed. See this update for other additional details of the service. There is also now a separate entry for Modern Wealth Management in the broker directory.]

Saxo Bank has expanded its services for UK investors with a new offering branded as Modern Wealth Management. As the name of the basic account – Saxo Invest – implies, this is aimed more at medium-to-long-term investors than Saxo’s traditional client base of traders.

On first glance, it’s a useful product, with a simpler front-end compared to the Saxo Trader platform and better options for tax-efficient investing. Unfortunately, there seems to be rather a large catch within the small print of the charges.

Continue reading »

Apr 162012
 

The tables in this post have been updated with new fees and brokers in the Best ISAs for foreign stocks – October 2012 update.

[Updated 23/04/2012 to include the ISA available from Saxo Bank on its Modern Wealth Management platform]

As we saw previously, the mark-up that many stock brokers put on currency conversions can be a very significant extra cost when trading international shares. And while you can’t ignore these hidden fees at any time, they become an especially  awkward problem for UK investors who want to buy foreign stocks within an individual savings account (ISA) tax wrapper.

While the ISA rules allow a reasonably large number of overseas stocks, they do not allow you to hold any foreign currency – so you need to go through the conversion between sterling and foreign currency every time you trade. As a result, excessively high FX commissions can become costly even more quickly than usual.

So what are the most cost-effective ISAs for dealing in foreign stocks? The table below shows the charges for the main UK execution-only brokers that offer ISAs and allow foreign stocks in them. (Some major firms – eg Interactive Brokers – don’t offer an ISA at all, while others – eg Barclays Stockbrokers – currently only allow UK shares to be held in one.) Continue reading »

Holding foreign funds and ETFs in an ISA

 FAQs
 

UK investors are often unsure about the rules for holding foreign funds and exchange traded funds (ETFs) in an Individual Savings Account (ISA).

The regulations on foreign shares are clear. These are eligible for an ISA if they trade on a recognised stock exchange. But funds – especially ETFs – never seem so simple. Even the ISA providers sometimes disagree on what’s eligible.

HMRC has a short list of ISA eligible investments online, but it still leaves some points unclear. So I asked HMRC’s ISA specialists to confirm some of the less straightforward situations.

In general, their answers mean that most foreign funds and ETFs will not be eligible, although there are a couple of exceptions. For the details, read on.

Continue reading »

Reclaim withholding tax on foreign dividends in an ISA or SIPP

 FAQs
 

If you hold your foreign stocks in an Individual Savings Acount (ISA) or Self-Invested Personal Pension (SIPP), you’re sheltering them from UK tax as much as possible. But you may still be paying more tax on them than is absolutely necessary.

That’s because many foreign governments impose withholding tax (WHT) on dividends before they even reach you. And in many cases, they are charging WHT at a higher rate than they are supposed to under their double taxation agreements (DTAs) with the UK.

Many investors don’t read the rules on this and just accept what they get. But if you understand how it works, you may be able to reclaim a sizeable amount of tax from abroad.

You could even get an extra 15% tax break on American dividends in your SIPP that most investors don’t know about. To find out how, read on.

Continue reading »