Vanguard Lifestrategy 20 and 40

ffacoffipawb

Are the distributions for these classed as interest or dividends?

Trying to maximise tax efficiency outside ISA and SIPP.

Thanks

ColdIron

I believe VLS40 is a dividend and VLS20 is interest

Ceme3000

According to HL the VLS20 is interest and VLS40 is dividend.

ffacoffipawb

ColdIron said:

I believe VLS40 is a dividend and VLS20 is interest

Ceme3000 said:

According to HL the VLS20 is interest and VLS40 is dividend.

Thanks for this. Do any of you have a link to the definitive source?

Thanks

bowlhead99

A fund can only designate its distributions as interest (and get the tax break for doing that) where it can say that at least 60% of its assets were in fixed income investments. LS40 holds about 60% in cash and fixed income but the amount will inevitably fluctuate from day to day. So, they don't try to claim interest treatment on their distributions. They do that on the LS20 product. Check the prospectus or the annual report if you want a source (you would see it in their accounts if it's not in the prospectus).

Depending on your personal circumstances you may do better by having a blend of LS20 and LS100, than LS40. If you are neutral from a personal point of view (no tax to pay on either interest or dividends) there would be a gain in tax efficiency by manually blending 20 and 100, thus avoiding the tax leakage to HMRC at the level of the fund which would have occurred in LS40.

However, it's a pain to manually keep rebalancing multiple specialist funds when you can just buy a single one off-the-shelf for your desired allocation, so most would be fine with the 40 rather than blending them, if it suited their personal tax situation.

ffacoffipawb

bowlhead99 said:

A fund can only designate its distributions as interest (and get the tax break for doing that) where it can say that at least 60% of its assets were in fixed income investments. LS40 holds about 60% in cash and fixed income but the amount will inevitably fluctuate from day to day. So, they don't try to claim interest treatment on their distributions. They do that on the LS20 product. Check the prospectus or the annual report if you want a source (you would see it in their accounts if it's not in the prospectus).

Depending on your personal circumstances you may do better by having a blend of LS20 and LS100, than LS40. If you are neutral from a personal point of view (no tax to pay on either interest or dividends) there would be a gain in tax efficiency by manually blending 20 and 100, thus avoiding the tax leakage to HMRC at the level of the fund which would have occurred in LS40.

However, it's a pain to manually keep rebalancing multiple specialist funds when you can just buy a single one off-the-shelf for your desired allocation, so most would be fine with the 40 rather than blending them, if it suited their personal tax situation.

Thanks bowlhead

Prefer dividends so LS40 it is and I will switch out of LS20.

Using Vanguard's GIA so the fees are low too.