Any good lower cost alternatives to VWRD and VHYL?

qbadger

masonic said:

qbadger said:

masonic said:

qbadger said:

Try to use your SIPP to hold the SP500 ETF. If that's not possible, change to a swap-based one to avoid US WHT.

It's not quite as simple as that... https://monevator.com/etfs-and-the-peculiar-effects-of-withholding-tax/

So any SIPP platforms still don't recover the additional 15% WHT? I assumed that all the "top-10" ones now do, but happy to stand corrected.

I'm not aware of any that do. When you hold one of the popular UK-listed, Ireland domiciled ETFs like VUSA or CSP1 (or indeed a global ETF investing in 60% US shares), then it is that Irish investment company that is seen as the beneficiary of any US dividends, so the US withholding agent doesn't see it as a qualifying pension scheme for relief of the full 30% WHT, the Irish investment company qualifies for a reduction to 15% WHT via the Ireland-USA double taxation treaty and pays the other 15% WHT within the ETF before accumulating or distributing the income as a foreign dividend from Ireland to its UK investors, which are nominees from pension schemes, S&S ISA providers and trading accounts. These downstream custodians, and you, the beneficial owner of the shares, are not the payers of the WHT, but have had exposure to it due to the Irish investment company having to pay it.

I've held a SIPP with AJ Bell and Fidelity in which I've held CSP1, and neither credited me with any tax reclaims during my holding period. I didn't think a tax reclaim would be possible, as it generally isn't possible to reclaim tax incurred by a different entity - from the US government's perspective, the pension scheme hasn't paid any tax. There was a recent thread about iWeb where it was revealed it doesn't even register for zero rate WHT for US-listed securities held within their SIPP (see this post). Personally, I just accept and take the 0.2-0.3% hit on annual performance, rather than go to the trouble of buying a US-listed ETF (tricky now due to PRIIPs regulations) or take on the additional counterparty risk of a synthetic ETF.

That's cleared up a misconception of mine and also raised something about iWeb I wasn't previously aware of - very helpful, thanks!

isayhello

masonic said:

I'm not aware of any that do. When you hold one of the popular UK-listed, Ireland domiciled ETFs like VUSA or CSP1 (or indeed a global ETF investing in 60% US shares), then it is that Irish investment company that is seen as the beneficiary of any US dividends, so the US withholding agent doesn't see it as a qualifying pension scheme for relief of the full 30% WHT, the Irish investment company qualifies for a reduction to 15% WHT via the Ireland-USA double taxation treaty and pays the other 15% WHT within the ETF before accumulating or distributing the income as a foreign dividend from Ireland to its UK investors, which are nominees from pension schemes, S&S ISA providers and trading accounts. These downstream custodians, and you, the beneficial owner of the shares, are not the payers of the WHT, but have had exposure to it due to the Irish investment company having to pay it.

I've held a SIPP with AJ Bell and Fidelity in which I've held CSP1, and neither credited me with any tax reclaims during my holding period. I didn't think a tax reclaim would be possible, as it generally isn't possible to reclaim tax incurred by a different entity - from the US government's perspective, the pension scheme hasn't paid any tax. There was a recent thread about iWeb where it was revealed it doesn't even register for zero rate WHT for US-listed securities held within their SIPP (see this post). Personally, I just accept and take the 0.2-0.3% hit on annual performance, rather than go to the trouble of buying a US-listed ETF (tricky now due to PRIIPs regulations) or take on the additional counterparty risk of a synthetic ETF.

Was just reading about these WHT charges on monevator earlier and it made me wonder, if you have a global or sp500 fund then are all the dividends you're paid from US companies being affected by this WHT at 15 or 30% so the dividends we receive are net of that?

masonic

isayhello said:

masonic said:

I'm not aware of any that do. When you hold one of the popular UK-listed, Ireland domiciled ETFs like VUSA or CSP1 (or indeed a global ETF investing in 60% US shares), then it is that Irish investment company that is seen as the beneficiary of any US dividends, so the US withholding agent doesn't see it as a qualifying pension scheme for relief of the full 30% WHT, the Irish investment company qualifies for a reduction to 15% WHT via the Ireland-USA double taxation treaty and pays the other 15% WHT within the ETF before accumulating or distributing the income as a foreign dividend from Ireland to its UK investors, which are nominees from pension schemes, S&S ISA providers and trading accounts. These downstream custodians, and you, the beneficial owner of the shares, are not the payers of the WHT, but have had exposure to it due to the Irish investment company having to pay it.

I've held a SIPP with AJ Bell and Fidelity in which I've held CSP1, and neither credited me with any tax reclaims during my holding period. I didn't think a tax reclaim would be possible, as it generally isn't possible to reclaim tax incurred by a different entity - from the US government's perspective, the pension scheme hasn't paid any tax. There was a recent thread about iWeb where it was revealed it doesn't even register for zero rate WHT for US-listed securities held within their SIPP (see this post). Personally, I just accept and take the 0.2-0.3% hit on annual performance, rather than go to the trouble of buying a US-listed ETF (tricky now due to PRIIPs regulations) or take on the additional counterparty risk of a synthetic ETF.

Was just reading about these WHT charges on monevator earlier and it made me wonder, if you have a global or sp500 fund then are all the dividends you're paid from US companies being affected by this WHT at 15 or 30% so the dividends we receive are net of that?

Yes, it would be the 15% rate if you are using typical funds. The current yield of the S&P500 is about 1.6%, so 15% of that would be 0.24%. The US is not alone in levying WHT, but many countries do not.

JohnWinder

 If expenses exceed the TER in relation to operating the funds, the Management Company will cover

any shortfall from its own assets.

Thanks. So perhaps some, to all, of any brokerage fees would be paid for by the investors.