Portfolio advice between Ireland and the UK

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
Drotciv
Posts: 2
Joined: Wed Mar 25, 2020 11:49 am
Location: Ireland

Portfolio advice between Ireland and the UK

Post by Drotciv » Thu Mar 26, 2020 9:30 am

Hello!

Please find below the required template and the information I thought was relevant to the situation I am in.

Country of Residence: Ireland

International Lifestyle: I will certainly move to the UK within the next few months/years.

Currency: EUR

Emergency funds: 10 000 EUR for a 6 months (couple) or 12 months (single) emergency fund

Debt: none

Age: 25

Desired Asset allocation: 75% stocks / 25% bonds with rebalance every year to have my “age in bonds”
Desired allocation to stocks outside your of country of residence: unsure

Please provide a hint as to the size of your current total portfolio: 9 000 EUR with an additional 10 000 EUR I am willing to invest, then around 800 EUR per month.

Also, if you know the details of any state pension(s):
I am contributing to an ESPP, and have a private pension plan where I max out my contributions in regards to my employer’s: 7% of gross monthly salary.

Ireland: State Pension (Contributory) at age 68 by 2028. Knowing that I started working at age 20, but would leave the country before the 10y mark, I would not be eligible (but would certainly get something back from my contributions, even if abroad)

UK: basic State Pension of up to 129.20 GBP per week

_______________________________________________________________

If you already hold some investments, it can help to give us some details of your current investment portfolio:

Current retirement assets

ESPP, E-Trade: 42%
- 33% 24 000 EUR in Employer Shares (10% gross monthly income contribution)
- 9% 6 800 EUR in RSUs from the Employer

General investment account, DeGiro: 19%

I am generally trying to go for a 3 funds portfolio (more or less), the stocks I invested in were as a first “test”, to play with it a bit.

0.4% cash (for investing – do not include emergency funds)

4.3% (39% of the 3 funds) iShares Core MSCI Worls UCITS ETF USD (EUR, Acc.), IWDA (EAM), TER 0.20%
4.1% (37% of the 3 funds) iShares MSCI Europe UCITS ETF EUR (GBP, Acc.), IMAE (EAM), TER 0.12%
2.6% (24% of the 3 funds) iShares Core E Corp Bonds UCITS ETF (EUR, Acc.), IEAA (LSE), TER 0.20%

2.8% Advanced Micro Devices, AMD
1.3% Coca-Cola Company, KO
0.7% Cypress Semiconductor Corp, CY
0.8% Engie, ENGI
0.7% Tencent Holdings, NNND
0.6% Cisco System, CSCO
0.6% Facebook, FB
0.5% Pfizer, PFE

Irish State Savings Prize bonds: 14%
- 10 150 EUR as an emergency fund

Regular lump sum bank account: 14%
- 10 000 EUR as potential investment money

Retirement savings account, tax deferred: 12%
- 8 500 EUR nothing but private pension scheme from my employer with 7% match, moderate risk

Sheltered investment account, tax free
- not available in Ireland, but would be hoping for an ISA in the UK

Total: 100%
_______________________________________________________________

If you are currently investing into these accounts, it may help us to have an idea of how much you invest annually. As above, if this section does not apply to you, or if it does but you do not want to share this information, please ignore this section.

New investments

New annual Contributions

DeGiro: irregular
ESPP: 10% of gross income monthly
RSUs: 2 000 EUR given every year, vesting over 3 years
Pension: 7% of gross income monthly, +7% from employer

As of now, I can save up to around 900 EUR per month, that I would be willing to invest regularly (i.e monthly)

_______________________________________________________________
Questions:

1:
My current 3 funds portfolio is accumulating because in Ireland, you need to pay CGT on dividends and disposal of assets, as well as a flat 41% every 8 years, regardless of selling.

At the time I thought it was smarter to avoid dividends if I had to pay taxes at the end anyways.

Planning on moving to the UK, I am now thinking of having a 3 funds portfolio that is distributing. Should I sell what I already invested to buy the “new” shares?

2:
My current 3 funds portfolio considers Europe as the home for the “local stocks”, should I change that to the UK when moving/investing?

3:
This can certainly be optimized, any recommendations or input would be greatly appreciated.

Thank you for reading!

DJN
Posts: 599
Joined: Mon Nov 20, 2017 12:30 am

Re: Portfolio advice between Ireland and the UK

Post by DJN » Thu Mar 26, 2020 1:10 pm

Hi,
you have spent a good deal of time setting out your existing and proposed investments. I would suggest that you have a read of the following sections of Bogleheads Wiki: https://www.bogleheads.org/wiki/Investing_from_Ireland
As you are already aware of the rather disappointing 41% tax rule on funds this is a good start. You have proposed a simple index fund approach and some stock picking. You haven't however included any mention of investment trusts and this is an area that is worth considering especially as the ones that you could easily access are UK based (Jersey jurisdiction) and they are treated as ordinary shares and can be taxed as ordinary shares allowing you to offset losses.
If you are going to go to the UK then life is much easier and straightforward and you should immediately avail of an ISA and self investment options. And you can keep your ITs.
DJN
Yah shure

TedSwippet
Posts: 2737
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Portfolio advice between Ireland and the UK

Post by TedSwippet » Thu Mar 26, 2020 2:03 pm

Welcome.
Drotciv wrote:
Thu Mar 26, 2020 9:30 am
Planning on moving to the UK, I am now thinking of having a 3 funds portfolio that is distributing. Should I sell what I already invested to buy the “new” shares?
It depends. I don't know what Ireland will do if you sell and buy replacement shares, but if it would apply a capital gains tax that you could avoid if you wait until after moving out of Ireland then you might at least consider waiting until you become a UK resident.

The UK will apply its capital gains tax on the total gain from purchase to sale (even if most of the holding period was when you were not a UK resident), but it has a £12k/year tax-free allowance for gains, and the rate is 10% (basic) or 20% (higher). If these rates and allowances mean that your tax in the UK would be lower than you would face in Ireland then waiting until after the move, assuming moving means you avoid any Irish tax on the sale, would make sense.
Drotciv wrote:
Thu Mar 26, 2020 9:30 am
My current 3 funds portfolio considers Europe as the home for the “local stocks”, should I change that to the UK when moving/investing?
This boils down to asking whether or not you should have any home country bias in your holdings. There are multiple viewpoints here, but no clear consensus.

Note that your current holdings already overlap, for example IWDA includes Europe, but you also have IMAE (Europe). This sort of overlap tends to make it tricky to balance things. It's better if you can decide on either a single all-world holding, or holding each region individually.

Topic Author
Drotciv
Posts: 2
Joined: Wed Mar 25, 2020 11:49 am
Location: Ireland

Re: Portfolio advice between Ireland and the UK

Post by Drotciv » Mon Mar 30, 2020 1:13 pm

Hello again,

Thanks very much for both of your answers, they were a great help.

From what you both told me, what I gathered from the wiki, boards.ie, GOV.co.uk and Reddit, I came up with the following:
DJN wrote:
Thu Mar 26, 2020 1:10 pm
You haven't however included any mention of investment trusts and this is an area that is worth considering especially as the ones that you could easily access are UK based (Jersey jurisdiction) and they are treated as ordinary shares and can be taxed as ordinary shares allowing you to offset losses.
I looked into ITs, but my understanding of them and their benefit to me is limited at the moment, therefore I will focus on my “multiple-funds portfolio” building first, but will certainly keep it in mind.
TedSwippet wrote:
Thu Mar 26, 2020 2:03 pm
It depends. I don't know what Ireland will do if you sell and buy replacement shares, but if it would apply a capital gains tax that you could avoid if you wait until after moving out of Ireland then you might at least consider waiting until you become a UK resident.
From what I gathered around, it appears that if I sell in the UK, I will only pay CGT and other taxes in the UK. This goes in line with the 8 years deemed sale of ETFs “freezing” if you leave Ireland before that.
TedSwippet wrote:
Thu Mar 26, 2020 2:03 pm
This boils down to asking whether or not you should have any home country bias in your holdings. There are multiple viewpoints here, but no clear consensus.

Note that your current holdings already overlap, for example IWDA includes Europe, but you also have IMAE (Europe). This sort of overlap tends to make it tricky to balance things. It's better if you can decide on either a single all-world holding, or holding each region individually.
DJN wrote:
Thu Mar 26, 2020 1:10 pm
If you are going to go to the UK then life is much easier and straightforward and you should immediately avail of an ISA and self investment options.
The ISA question has been duly noted and studied. I also decided that there should not be any home country bias, and I took the overlap into consideration while researching the ETFs below.

So to follow up on that, I:

- will stop investing in the ETFs mentioned in my first post, while keeping them until I leave for the UK and sell them there.
- did some research regarding the ISA providers:
- I downloaded the list of them on the GOV.co.uk website and eliminated them by criteria
- gathered all of their charges and investment options in one place
- compared all of them against each other to a scenario I would be able to relate
- ranked them from the most expensive to the cheapest

I came up with the most affordable being more or less:
- Barclays Smart Investor
- AJ Bell
- Interactive Investor
- Lloyds
- Halifax

All these would be under 140 GBP per year over 30 years for 72 trades a year.

Then I started looking for the new ETFs that would match my needs, and I think I will go for Vanguard, following what has been discussed, I will eliminate overlap and reduce charges by selecting:

Vanguard FTSE Japan UCITS ETF (VJPN, 0.15%)
Vanguard FTSE Developed Asia Pacific ex Japan UCITS ETF (VAPX, 0.15%)
Vanguard FTSE North America UCITS ETF (VNRT, 0.10%)
Vanguard FTSE Developed Europe UCITS ETF (VEUR, 0.10%)
Vanguard FTSE Emerging Markets UCITS ETF (VFEM, 0.22%)

These combined would give me a 14% broader exposure than the FTSE All-World UCITS ETF (VWRL, 0.22%), while reducing costs by 50% if allocating money following VWRL asset allocation.

Now what is left to do is considering bonds.

I would like to know if it is OK going for a World Bond Index such as
Vanguard Global Aggregate Bond UCITS ETF (VAGP, 0.10%)
or if I should give it more consideration?

From what I understood, the point would be to use bonds as a constant income flow and to annually rebalance stocks into bonds following the “your age in bonds” rule.

Thanks!

DJN
Posts: 599
Joined: Mon Nov 20, 2017 12:30 am

Re: Portfolio advice between Ireland and the UK

Post by DJN » Mon Mar 30, 2020 1:41 pm

Hi,
the only thing that I would add is that over the next 12 months the opportunity to buy into the market is probably going to be positive for anyone with a bit of cash. Or in other words I wouldn't stop investing. Just keep going.
DJN
Yah shure

Post Reply