Dividend payments delayed by Brexit

Investors in exchange-traded funds have been hit by delays to dividend payments thanks to complications caused by Brexit.

Most ETFs available to British investors are based in Dublin and since Brexit have been classified as international rather than domestic stocks, meaning they have to follow a different process to pay out their dividends to investors.

Hargreaves Lansdown, the stockbroker, said Irish ETF dividends were now first processed by a European payments settlement group called Euroclear and then passed on to Crest, a British equivalent, before reaching stockbrokers, which pass them on to investors.

This has introduced an extra layer of administration between investors and their dividends, which has delayed payouts by two days, according to Hargreaves Lansdown.

Alex Lambert from the firm said: “One particular intricacy of Brexit means that Irish-based ETFs are no longer treated as ‘domestic’ and so dividends take longer to arrive due to the additional checkpoints between the issuing company and the broker.”

One reader who uses Hargreaves Lansdown reported delays to dividends from six Irish- based ETFs, including the iShares UK Dividend

Ucits ETF and a number of Vanguard funds.

Customers of AJ Bell, a rival firm, face delays of around one day, which the broker said was due to payments being received in euros which had to be converted into pounds before being paid to investors.

Many ETFs, which are funds quoted on the stock market, are hosted in Ireland thanks to a favourable tax regime and its EU membership, which provides financial rules for the entire bloc, making it possible for investors in many countries to buy funds easily.