World Equity ETFs Paying Dividends in GBP

[scrumpyjack]

My point re exchange rates is that if you are buying an ETF which is in effect a world tracker , it must be buying more or less every currency in the world. It will obviously have to convert these into some common currency. No investor has any control over the exchange rates used nor any commission involved so to worry too much about the final exchange rates to the currency of your choice does not seem to me to make a lot of sense.

Dod

I'm not worried about that as Vanguard will get the best market rates for its dealings at a tiny fraction of a percentage market cost. But it does irritate me that HL skim perhaps £20 off every quarterly dividend I receive in my SIPP on my VWRL holding. Yes it is tiny in the scheme of things but it is IMO not a justified charge. In my Chase bank account, for example, any foreign currency transaction is converted at the interbank rate with no charge,

[kempiejon]

. But it does irritate me that HL skim perhaps £20 off every quarterly dividend I receive in my SIPP on my VWRL holding. Yes it is tiny in the scheme of things but it is IMO not a justified charge. In my Chase bank account, for example, any foreign currency transaction is converted at the interbank rate with no charge,

And AJB would charge £7 - only 0.5% rather than 1.5% HL.
I was turned onto the accumulating option of vanguard global etf VWRP to skip that % forex and dealing to reinvest my dividends in my ISA. While I am adding to the holding most months no extra direct cost for div reinvestment. Not relevant if paying away the natural yield though of course acc versions don't work in those circumstances.

[GeoffF100]

In my Chase bank account, for example, any foreign currency transaction is converted at the interbank rate with no charge,

I think you will find that they use MasterCard's rate, not the rate in the FX market itself.. There will be a spread on the FX market, and MasterCard (or the bank that your broker uses to do the conversion) will take a cut too. None of this is transparent to us.

[CleverClogs]

Thank you who replied. A good discussion.

I hear that there is different treatment of foreign dividends depending on whether in an ISA or trading account as in an ISA they are converted to GBPs automatically. Which, while handy, will still result in the 1.5% charge (to reiterate, I am with Interactive Investor). And yes, I am assuming that when a fund pays out foreign earnings in GBP, the exchange rates used will be better. I may be wrong. *

Of the suggestions as to ETFs etc that I can buy in GBP and pay dividends in GBPs (into a trading account):
VEVE, VWRL, VHYL I see two responders have confirmed these pay in USDs
So, we’ve not found any ETFs that pay out in GBPs : o (

Of the OEICs suggested, HBBC data confirmed dividend currency is GBPs:
HSBC FTSE All World ISIN GB00BMJJJG09 - div frequency = annual which is a pity
(I’ve discounted GB00BMJJJF91 as it is not distributing)
And I am wondering if all GB based OEICs will pay out in GBPs?
Fidelity Index World Fund P Income GB00BP8RYB62 pays quarterly and at 0.12% looks a good bet. Unfortunately after scouring Fidelity info. I can’t find confirmation that it pays out in GBPs. Can anyone who holds this, not in an ISA, please let me know?

Investment trusts
FCIT & Alliance Trust - Yes, do pay out in GBPs, but the larger fees + 0.5% stamp duty take a bigger chunk.

• The other aspect that reduces returns on some dividends is if they cannot be auto-reinvested, as I’ve found to be the case when receiving USD dividends, as if I am not on-the-ball, they can sit for months as cash!

[DrFfybes]

And I am wondering if all GB based OEICs will pay out in GBPs?
Fidelity Index World Fund P Income GB00BP8RYB62 pays quarterly and at 0.12% looks a good bet. Unfortunately after scouring Fidelity info. I can’t find confirmation that it pays out in GBPs. Can anyone who holds this, not in an ISA, please let me know?

The GB prefix to an ISIN indicates it is UK domiciled. AFAIK it will be priced in and pay dividends in Sterling, I don't know of any that don't.

[PrefInvestor]

My point re exchange rates is that if you are buying an ETF which is in effect a world tracker , it must be buying more or less every currency in the world. It will obviously have to convert these into some common currency. No investor has any control over the exchange rates used nor any commission involved so to worry too much about the final exchange rates to the currency of your choice does not seem to me to make a lot of sense.

Dod

But the provider of the ETF (Vanguard or whoever) will deal with 99% of the currency transactions for all of those holdings in foreign currencies, they will have mechanisms set up to do that and charges for doing it are built into the ETF Charges - which are usually very low.

BUT if you are investing from an ISA and you choose an ETF that pays dividends in USD and your broker has heavy handed 1.5% FX charges (like HL) then you are going to get hit with those charges EVERY time a dividend gets paid. Thats not good.

Better to invest in the Accumulating version of the ETF IMHO where the ETF Provider will automatically re-invest your USD dividends for your benefit, cutting the broker out of the picture, as no dividends are paid and it looks like a growth stock. Its not difficult just invest in VWRP instead of VWRL, job done. If you need the cash then you'll have to sell some stock - cant have it all ways.

ATB

Pref

[CleverClogs]

Thanks, Yes, Acc. ETFs suit me well in my ISA and SIPP where I don't have to calculate the Excess Reportable Income (which I find a bit fiddly to divine those well-hidden ERI rates that Interactive Investor omits from my annual tax statement, do the sums, convert currency with HMRC rates).. paying the income tax is no different to dividends, but then when selling an Acc. ETF, all years of ERI have to be added to the aquisition price, so good record keeping is essential.

It is a lot of bother. My guess is that the majority of people either are ignorant of ERI or choose not to bother. That is why I have moved to Dist ETFs in my trading account.

[PrefInvestor]

Thanks, Yes, Acc. ETFs suit me well in my ISA and SIPP where I don't have to calculate the Excess Reportable Income (which I find a bit fiddly to divine those well-hidden ERI rates that Interactive Investor omits from my annual tax statement, do the sums, convert currency with HMRC rates).. paying the income tax is no different to dividends, but then when selling an Acc. ETF, all years of ERI have to be added to the aquisition price, so good record keeping is essential.

It is a lot of bother. My guess is that the majority of people either are ignorant of ERI or choose not to bother. That is why I have moved to Dist ETFs in my trading account.

Well just get yourself fully tax sheltered and voila, no more taxes and no tax returns or paper work !. Took me years to achieve but it was well worth it. Accumulating ETFs save on dividend re-investment costs too .

ATB

Pref

[Steveam]

Thanks, Yes, Acc. ETFs suit me well in my ISA and SIPP where I don't have to calculate the Excess Reportable Income (which I find a bit fiddly to divine those well-hidden ERI rates that Interactive Investor omits from my annual tax statement, do the sums, convert currency with HMRC rates).. paying the income tax is no different to dividends, but then when selling an Acc. ETF, all years of ERI have to be added to the aquisition price, so good record keeping is essential.

It is a lot of bother. My guess is that the majority of people either are ignorant of ERI or choose not to bother. That is why I have moved to Dist ETFs in my trading account.

Distributing ETFs in unprotected trading accounts can still have ERI to be reported. It’s really a (very) minor pain.

There are brokers who charge little (or no FX). HSBC use mid-market, I’m sure there are others and better. [This not a recommendation of HSBC although I’m happy enough with them amongst others].

Best wishes,

Steve