Which fund platform is the cheapest?
If you're ready to start taking charge of your stocks and shares Isa or self-invested personal pension (Sipp), you need to get your head around how online fund platforms work and what they cost.
Also known as fund supermarkets, these websites have four basic functions:
- Help you buy things you want to invest in
- Hold things while you still want to invest in them
- Report on them so you know how they're performing, Sell them.
There are a lot of platforms to choose from, and while choice is a good sign that a market is working competitively, it doesn't always make it easy to compare the different fees charged, or services offered. And both those things are important when selecting a platform.
Here, you'll find the cheapest (and most expensive) platforms for investing through a stocks and shares Isa and Sipp depending on portfolio size - from £5,000 to £50,000.
Moneywise asked the research wizards over at financial services consultancy the lang cat to crunch the numbers based on a range of portfolio sizes and frequency of trades across some of the most well-known platforms. You'll find the full cost breakdown in the two tables below but we'll focus on the two cheapest and two most expensive homes for your investments in the main article.
Stocks and shares Isas
The charges outlined in this section should be viewed as the long-term investment costs of operating a stocks and shares Isa.
They ignore platform set-up costs – which vary widely – and instead focus on the fees levied to run your investment account, including making 12 fund switches a year (six buys and six sells – which the lang cat points out equates to someone changing funds once every couple of months). So these figures should be viewed as indicative of what you'll pay from year two onwards.
£5,000, 10,000 or £20,000 to invest
For Isa portfolios of these amounts, two platforms don't charge a penny. AXA Self Investor doesn't charge for fund switching and is waiving its ongoing platform fee (usually 0.35% on funds up to £250,000) until 1 May 2016 for new customers signing up by 30 April 2015.
Aegon's Retiready – a platform for people aiming to build up their retirement funds – also doesn't charge for fund switching and is currently offering a 'no charge for life' deal for new customers with Isa portfolios of up to £50,000 joining before 6 April.
Special offers aside, fees at Cavendish Online and Charles Stanley Direct work out as £12.50 a year for a £5,000 portfolio, £25 for £10,000 and £50 for £20,000. They charge a platform fee of 0.25% but fund switching is free.
At the other end of the charging spectrum, Alliance Savings Trust works out most expensive for all three portfolio sizes. Its £75 'wrapper charge' for holding investments within an Isa and £12.50 trading charge takes the total annual charge to an eye-watering £225.
Even if you don't want to trade in and out of funds at all during the year (which is fairly common for investors with smaller portfolios), the wrapper charge alone makes Alliance more expensive than 23 out of the 29 platforms the lang cat looked at for a £5,000 investor, more costly than 19 platforms for a £10,000 investor and more expensive than 14 platforms for £20,000 investors.
£50,000 to invest
With this increased portfolio size Isa investors can still snap up the Axa Self Investor and Aegon Retiready fee-free deals but the cheapest available from the rest of the platforms still cost significantly more than the running fees for smaller portfolios. The cheapest is from iWeb at £60 a year. This consists of no annual fee and a £5 fee for each trade. The next cheapest platforms are once again Cavendish Online and Charles Stanley, at £125 a year.
The most expensive platform is Nutmeg, which would set you back a very hefty £450 a year. Nutmeg is a little different to most of the platforms compared by the lang cat as it's an online 'full discretionary management service', meaning it does more than just execute trades you wish to make. In a nutshell, this means it comes up with a portfolio of investments to suit your risk portfolio and updates it as and when required.
Chelsea Financial Services is the next most expensive place to run a £50,000 stocks and shares portfolio, with an annual cost of £300. While it doesn't charge for fund switching, its annual running costs from year two onwards equates to 0.25% on a £50,000 Isa portfolio.
If you want more control over your investment options than you have with your employer's pension scheme, or to trim back on the inflated fees, these schemes sometimes charge, a self-invested personal pension (Sipp) could be a good home for your money. The running costs have fallen in recent years, meaning Sipps are now much more accessible for people with modest amounts of money to invest.
£5,000 to £10,000 to invest
Aside from the special offer by Aegon's Retiready that also applies to Sipps – making it the cheapest place to run a Sipp portfolio of up to £50,000 - Bestinvest has the most competitive charges for year two onwards at 0.3% on portfolios up to £250,000, which works out at just £15 on a £5,000 portfolio and £30 on £10,000.
Meanwhile, Alliance Trust Savings works out as most expensive for portfolios up to £10,000 at £336 a year. The Share Centre and Halifax Share Dealing are the next most expensive and all three have fixed fee charging structures rather than percentage based ones. This makes them more costly for investors with smaller portfolios but much more cost-effective for those with larger sums to put away.
£20,000 to invest
Telegraph Investor (operated by our sister website Interactive Investor) comes out joint cheapest in this category, along with Bestinvest, at £60. Alliance Trust and The Share Centre work out as the most costly, at £336 and £359 respectively.
£50,000 to invest
At this portfolio size, even the cheapest running costs go flying past £100. In fact, the best you'll find are again from Bestinvest and Telegraph Investor at £150. Barclays, Close Brothers and Fidelity aren't too far away at £175 but this time TD Direct takes over as the most expensive platform with a cost of £390 – that's an increase of 160% on the cheapest costs.
Stockbrokers' annual fees for Sipps
|The Share Centre||£263||£273||£359||£359|
|True Potential Investor||£20||£40||£80||£200|
Do your homework
Making sense of the wide range of stocks and shares Isa and Sipp charging structures and getting to a level playing field can be tricky. But as the tables show, it really does pay to do your research as the proportion of charges vary greatly depending on how much money you have to invest and how often you are likely to want to switch around your investments.
However, remember that cost is only one aspect of choosing a platform. "What is absolutely vital is that you understand exactly what it is you're looking for in an investment platform," says Steven Nelson, research director at the lang cat.
"How often you trade, how much guidance you need with investment decisions, how important a big brand is to you and how much emphasis you place on a shiny website are other questions you should get to the bottom of before making your choice."
How much stockbrokers charge a year for running a stocks and shares Isa
|AJ Bell Youinvest||£69.40||£79.40||£99.40||£159.40|
|Alliance Trust Savings (ATS)||£225.00||£225||£225||£225|
|AXA Self Investor||£17.50||£35||£70||£175|
|Charles Stanley Direct||£12.50||£25||£50||£125|
|Chelsea Financial Services||£30||£60||£120||£300|
|Fidelity Personal Investing||£17.50||£35||£70||£175|
|Halifax Share Dealing||£162.50||£162.50||£162.50||£162.50|
|The Share Centre||£147.60||£157.60||£243.60||£243.60|
|True Potential Investor||£20||£40||£80||£200|
*James Hay Modular iPlan customers need to open a Sipp before access to an Isa is allowed.
Like a self-select ISA but for pensions, self-invested personal pension is a registered pension plan that gives you a flexible and tax-efficient method of preparing for your retirement. It gives you all sorts of options on how you put money in, how you invest it and how it’s paid out and offers a greater number of investment opportunities than if the fund was managed by a pension company. SIPPs are very flexible and allow investments such as quoted and unquoted shares, investment funds, cash deposits, commercial property and intangible property (i.e. copyrights, royalties, patents or carbon offsets). Not permitted are loans to members or people or companies connected to the SIPP holder, tangible moveable property (with the exception of tradable gold) and residential property.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.