-
Vanguard's US Equity Index Common Contractual Fund added to Standard Life's pension platform
-
The fund offers significant tax advantages to qualifying pension funds
-
Standard Life the first provider to make the fund available to UK corporate and retail pension customers
-
Standard Life1 has become the first provider to add Vanguard's US Equity Index Common Contractual Fund2 to its pension platform. The new fund, launched by Vanguard3 in December 2011, is available to both retail and corporate pension fund customers and offers significant tax advantages.
Currently, qualifying pension funds investing in US equity mutual funds (unit trusts, open ended investment companies and similar categories of regulated vehicles) are impacted by 15% withholding tax if the fund is domiciled in the UK or 30% withholding tax if it is domiciled in Ireland. This level of taxation can have a significant impact upon the ultimate pension pot available to fund retirement for individuals.
The CCF permits qualifying investors to achieve the same tax treatment as if they invested in the underlying securities directly. As a result, dividend withholding taxes on US equities may be eliminated ensuring that qualifying investors receive all of the treaty tax relief which is due.
"An investor could achieve a higher after-tax investment return with a CCF vehicle than an equivalent mutual fund," says Graham Dow, Head of Investment Groups' Strategy & Insight. "The CCF is a solution which combines the tax-efficient nature of separate accounts with the economies of scale, diversification, corporate governance and cost savings benefits of pooled vehicles."
"Pension schemes expend considerable effort to find the lowest total expense ratio (TER) fund mandate but shopping for price alone can be self defeating if they don't take account of the tax drag, which can obliterate a perceived cost advantage," comments Nick Blake, Head of Retail at Vanguard. "Indeed, the tax drag can be up to £30,000 on a £10m US equity fund domiciled in the UK and up to £60,000 on a US equity fund domiciled in Ireland4."
|
