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 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 »

Holding foreign funds and ETFs in an ISA


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


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 »

Holding foreign stocks in an ISA or SIPP


Many UK investors don’t realise that a personal tax wrapper – ie an Individual Savings Account (ISA) or a Self-Invested Personal Pension (SIPP) – can be used to shelter foreign shares from tax.

Most brokers don’t really advertise this useful rule and some don’t permit foreign shares to be held in these accounts – especially with ISAs. To check whether your broker does or find one who will, see the UK stock broker comparison table.

But that’s their decision, not the tax authorities. The UK regulations are clear. To qualify for an ISA, a stock must simply be listed on a recognised stock exchange. A list of recognised exchanges can be found on the HMRC website here.

With SIPPs, almost any investments are permitted, including shares anywhere in the world. Some providers apply the same recognised stock exchange restriction for foreign shares, but others allow you to hold almost all overseas stocks and funds [PDF].

That may have answered your question already. However, there are a couple of quirks to the system. And to get the best use of your ISA or SIPP for foreign stocks, it helps to understand way they are taxed. For more on that, read on.

Continue reading »