Vanguard extend ETF range

SnowMan

Thought I'd paste in my original question to FD

I hold ETFs in my share portfolio that are sterling related classes. However dividends are paid in dollars. Can you please tell me (or give me a link to) information on what currency conversion charges FD apply on converting these dividends from dollars to pounds when a dividend is paid. Thank you.

And the answer from FD 2 weeks later

Thank you for your message dated 24 Feb 2014. When a dividend is received via our custodian, we are provided with the payment details by the company paying. If a dividend is recieved in USD, and it is to be paid in GBP, there will be an exchange rate used, this will fluctuate as the exchange rate changes

I rang them up after this to say that didn't answer my question, and asked them to disclose what spread they were using in the foreign currency conversion. They kept to the position that they couldn't add more to this response and they didn't make any explicit charge. Eventually I managed to get them to look into it further. We'll see what response I get.

With VUSA my best guess is that HSBC use a conversion rate with a +-2.5% adjustment (depending on which way you are switching).

If so that will add about 0.07%pa to the effective AMC (2.9% yield X 0.025). As the amc itself is 0.09%pa it is of a similar magnitude to the amc itself.

It does show the issues out there with non-disclosure of charges. You can't even find out significant charges when you ask.

Just to say I am happy with FD sharedealing service generally.

SnowMan

talexuser wrote: »

I'm all ISA'd and pensioned out so need to invest outside a tax wrapper and prefer the dividends to be reinvested for a few years yet to avoid income tax thresholds and only have capital gains to worry about.

A spread of these EFTs are looking attractive but I have no experience in this area. Are your EFTs on Crest like shares? Does anyone think XO might be the best route for automatic reinvestments?

I don't think ETFs will help you with this specific issue, if I am understanding your question correctly.

The dividends from the ETFs count as income in the tax year they are received in the same way that dividends from shares is income.

So those dividends will come into the assessment of whether you are basic rate or higher rate.

They are strictly speaking foreign dividends as most ETFs are registered in Luxemburg or Ireland (you have to put them in a different place on the tax return) but as long as the ETFs have UK reporting status, the main Vanguard ones discussed here all do, then it all usually works just like a UK dividend. If you are a basic rate taxpayer (after allowing for dividend income) then there is no further tax on the ETF dividend.

Outside of an ISA dividends might as well be sent straight back to your bank or savings account. You can always put a lump sum back in at some later point to reflect dividends built up, but of course wait until you have received a large enough amount in dividends to make the reinvestment cost effective, taking into account dealing costs.

talexuser

Thanks, Snowman. Yes, I understand there is no equivalent of accumulation EFTs (even though with acc funds details of reinvestments would have to be kept for nominal income purposes), it's just the costs of these Vanguard funds are attractive.

I've been toying with the idea of acc Investment trusts outside a tax wrapper to mop up excess cash but getting to the 40% threshold is a real disincentive, whereas cashing in your capital gains allowance each year in the future is not so bad.

SnowMan

talexuser wrote: »

Thanks, Snowman. Yes, I understand there is no equivalent of accumulation EFTs (even though with acc funds details of reinvestments would have to be kept for nominal income purposes), it's just the costs of these Vanguard funds are attractive.

There are a few (but not many) accumulation ETFs floating about, but the notional income that is reinvested under these is still treated as (notional) dividend income in the year it is accumulated as I understand it (don't claim to be an expert on that though)

gadgetmind

Hmmm, BestInvest are having a wobble and I haven't been able to buy VUKE today. However, the FTSE 100 has obliged by dropping 1%, which is nice!

Glen_Clark

SnowMan wrote: »

Thought I'd paste in my original question to FD

And the answer from FD 2 weeks later

I rang them up after this to say that didn't answer my question, and asked them to disclose what spread they were using in the foreign currency conversion. They kept to the position that they couldn't add more to this response and they didn't make any explicit charge. Eventually I managed to get them to look into it further. We'll see what response I get.

With VUSA my best guess is that HSBC use a conversion rate with a +-2.5% adjustment (depending on which way you are switching).

If so that will add about 0.07%pa to the effective AMC (2.9% yield X 0.025). As the amc itself is 0.09%pa it is of a similar magnitude to the amc itself.

It does show the issues out there with non-disclosure of charges. You can't even find out significant charges when you ask.

Just to say I am happy with FD sharedealing service generally.

Keep up the Good Work :T
Seems like my Personal Pension where we couldn't even find out how much the Prudential were helping themselves to in charges :mad:
Would be remarkable if they are taking as much to switch the dividends into Sterling as Vanguard are taking to manage the fund :mad:

SnowMan

Glen_Clark wrote: »

Keep up the Good Work :T
Seems like my Personal Pension where we couldn't even find out how much the Prudential were helping themselves to in charges :mad:
Would be remarkable if they are taking as much to switch the dividends into Sterling as Vanguard are taking to manage the fund :mad:

Thanks. Haven't had a response yet.

Glen_Clark

Maybe we can compare the ETF dividends we get on different platforms.
This is the most recent ETF dividends I received on X-O;
VWRL dividend 27.12.13 = 13.182230281p per share
VUSA dividend 27.12.13 = 7.96985583224p per share
VUKE dividend 27.12.13 = 18.3688362919p per share

SnowMan

Glen_Clark wrote: »

Maybe we can compare the ETF dividends we get on different platforms.
This is the most recent ETF dividends I received on X-O;
VWRL dividend 27.12.13 = 13.182230281p per share
VUSA dividend 27.12.13 = 7.96985583224p per share
VUKE dividend 27.12.13 = 18.3688362919p per share

Your VWRL and VUSA on 27th December were converted based on $1 = £0.5955 and £0.5953 based on those figures I calculate.

My VFEM and VUSA on 27th December were converted at £0.6092 and £0.6090

(my VWRL was actually paid on 31st December so can't compare that but conversion at £0.6060)

And we have a different x-o conversion on 27th December in this post by westy of £0.6124

Glen_Clark

SnowMan wrote: »

Your VWRL and VUSA on 27th December were converted based on $1 = £0.5955 and £0.5953 based on those figures I calculate.
(my VWRL was actually paid on 31st December so can't compare that but conversion at £0.6060)

I recall my VWRL was credited several days after 27 Dec, probably 31 December, but dated 27 December.
Where do you find the amount paid in dollars please?
All I can see on Vanguard website is the payment dates.