View more on these topics

Pension cash could switch to US after tax change

Pension investors can escape Gordon Brown’s tax raid by investing in US equities following a change in tax policy, says Standard Life marketing technical manager John Lawson.

Insured pension schemes invested in US equities will no longer be sub- ject to a withholding tax from US authorities so dividends from these stocks will be tax-free.

The Association of British Insurers has been lobbying the US Internal Revenue Service and it has has finally offered the same tax boost for insured pension schemes invested in US equities as those gained for non-insured schemes two years ago.

Until May 2003, non-insured schemes, such as defined-benefit and some money-purchase schemes, receiving dividends from US equities were subject to 15 per cent withholding tax.

An agreement has now been reached between the IRS and the ABI, meaning that insured schemes, such as personal pensions, stakeholder and executive pensions, no longer face this tax hit. This has been backdated to May 2003,so insured schemes with US equity exposure will get a performance boost.

This contrasts starkly with the 10 per cent tax levy on UK equity dividends received by pension funds following Gordon Brown’s removal of advance corporation tax relief in 1997.

Lawson calculates that this should lead to US equity pension funds enjoying a 28.5 basis points per year performance boost. Balanced funds with 20 per cent exposure to US equities would get a 5.7 basis point annual boost, based on the S&P 500’s current 1.9 per cent yield.

Lawson says: “Although the performance boost for managed funds is likely to be quite small, it is nevertheless welcome.”

Bestinvest adviser Justin Modray says: “We would not recommend investors to put all of their pension investments into US equities, primarily because of currency risk, but also on a pure asset-allocation basis.”


Webline poaches Pru’s Byford

Fromer Prudential e-business strategy manager Adam Byford is joining Webline as head of service strategy.Byford, who had been at Pru for 15 years, will draw on his experience in managing relations with portals and technology suppliers for his new employers. He was also previously chairman of Unipass.

Pru’s Byford moves to Webline

Prudential ebusiness strategy manager Adam Byford is to join Webline after 15 years at the provider.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm