Are SIPPs now better than ISAs?

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.


Tax hit for UK investors in offshore funds

Interesting article on Citywire today covering the tax position of offshore funds for UK investors:

Wealth managers who unwittingly put their clients into the wrong type of offshore fund, structured product or ETF risk saddling them with a tax hit of up to 50% on their investments, accountants have warned.

Small boutique funds and new products coming to market that are based offshore may not have reporting funds status (RFS), or could still be in the process of seeking it. Many investors also view ETFs as shares rather than funds, exacerbating a lack of understanding on the issue.

Investors who redeem holdings in funds that do not have RFS could face punitive income tax rates of up to 50%, rather than capital gains tax of either 18% or 28%.

This is a topic I’ve covered on the site before: Avoid the tax trap on foreign funds. Unfortunately, it is no surprise to come across individual investors falling foul of this, since the rule is completely counter-intuitive at first – why would you expect that capital gains would be taxed as income?

However, it is a little more surprising if any significant amount of wealth manager clients are having this problem – as the accountants in the article are suggesting – since the issue is not exactly obscure and one would expect it to be well-recognised among any advisers who are putting clients into offshore funds.


Tax on Singapore stocks for non-residents

This article is about Singapore stock brokers and tax for non-residents. Looking for a stock broker in Singapore instead? Read this comparison of the best Singapore brokers and articles on opening a bank account and opening a brokerage account there.

I’ve often get questions about tax on stocks for non-resident investors who have a Singapore stock broker account. The answer is both simple and good news for most investors.

Singapore is an extremely low-tax jurisdiction and if you are non-resident, you should end up paying nothing to the local tax authorities – although obviously you may still owe taxes in your home country.