Hi @Eadwig and @J_Westlock, Below are a set of my collected personal observations and conclusions on SIPPs, ISAs, foreign currency accounts and exposure to the USD. If I’ve got anything wrong I am sure you will point it out !.
I was always in occupational pensions when I was working, so I never thought about opening a SIPP.
Would that I had because the IHT implications are significant.
But now that I am retired the maximum that I could contribute if I started a SIPP Is £2,880 a year.
So I can NEVER accumulate a worthwhile sum in a SIPP now.
I have considered opening a SIPP, putting my £2,880 a year in, collecting the £720 from the tax man and doing that every year. Obviously I could invest that money too. But if I ever want to withdraw it you then have to pay tax at your marginal rate – so effectively they take back all that money that they gave you. So that ONLY makes sense to me if you can just leave the money in the SIPP for your dependants. Sadly I don’t see myself being able to build up a big enough pot that way to be useful for IHT purposes.
So I see SIPPs as a closed book to me now – I can never have one. I no longer think about it.
All of my invested money is in ISAs instead providing my tax shelter.
The benefits of ISAs are significant to me, no CGT or income tax to pay and no tax returns to do.
I would not want to return to having to operate a normal trading account.
I am no longer in a position to regularly contribute more than the £20,000 a year limit on ISA contributions – which I know causes some to need to continue to use trading accounts, but that situation doesn’t apply to me.
Only a SIPP lets you reclaim withholding tax, you can’t do that with an ISA.
Only a SIPP permits you to have multi-currency accounts (or a regular trading account obviously but then you are taxed on your gains).
So if I invest in a US listed anything that pays dividends I CANNOT avoid withholding tax or currency charges (and all transactions in a foreign currency including dividend receipt will incur a currency charge).
Of course as J_Westlock points out I could still invest in ETFs not listed in the US but which track US indices as a way of avoiding withholding tax. I may do that in the future.
Even if I had a USD account, as a UK resident operating my day to day life in GBP, would it make sense to put a load of money into that ?.
If I did I would incur significant charges AND have to pay further charges every time I wanted some money out in GBP. Makes no immediate sense to me unless I was investing the USD money.
But if I had a USD account and used it to trade stocks then that would have to be in a regular trading account, making me liable for tax. I see no benefit in taking that approach.
I realise that a rising USD will impact on me through inflation, but whatever I do I cannot avoid that cost of living impact (except by trying to invest in things that provide income that rises with inflation).
If I invest in USD assets then I am taking on currency risk. Doing so may be beneficial when the USD is rising (as it has been for many years) but it is not guaranteed and currently a Brexit deal of some form might well cause the GBP to appreciate significantly. That would be a significant risk were I to put a lot of money in USD.
Those who invest only in the FTSE take almost no currency risk (unless they invest in foreign earners). This can be seen as advantageous at times – but I am not advocating that approach. I have about 30% of my portfolio invested overseas and I am comfortable with that proportion. But I am not inclined to increase that right now.
So there you have it. Others situations are likely totally different. Obviously you play the game as best as you can……