Barclays unveils new Isa platform fees
Barclays Stockbrokers has announced new Isa platform fees that match those announced by Fidelity, meaning both Barclays and Fidelity will be undercutting Hargreaves Lansdown when their new fees come in.
Barclays said it will charge a fund administration fee of 0.35% to clients with portfolios worth £500,000 or less - the same percentage as Fidelity charges clients with portfolios up to £250,000, but more than Hargreaves will be charging.
Barclays also said investors will pay an average annual management charge (AMC) of 0.68% on funds. This is slightly higher than the 0.64% average AMC promised by Fidelity and the 0.65% promised by Hargreaves Lansdown (HL), although both of the latter groups are promising deals on a select group of recommended funds.
But Barclays said there will be a £35 minimum charge for investors buying or switching into 'clean shares', while Isa clients who are not fully invested in funds will pay an administration fee of £30 a year.
The new changes being imposed by Barclays, Fidelity and Hargreaves are the result of the Retail Distribution Review, which is banning the payment of commission on the sale of funds to make it easier for investors to compare fees. As a result investment platforms have been in the process of restructuring their charges. Most now charge an account or platform fee and either rebate commission via the retail shares, or sell so-called 'clean shares', which have a lower AMC that does not include the payment of commission.
Clear, simple and fair
Alastair Thaw, director of Barclays Stockbrokers, said: "We are introducing what we believe to be a clear, simple and fair RDR funds pricing structure. The Retail Distribution Review has encouraged a more competitive marketplace, however we recognise that the changes can be confusing. Investors need clear and simple information about the price they are paying and we have designed our pricing structure with clarity, simplicity and fairness at its heart."
Last week, Fidelity said those with accounts worth up to £250,000 will pay a fee equivalent to 0.35% of their holdings, while wealthier clients with accounts between £250,000 and £1m will pay just 0.2% a year.
That announcement was a direct challenge to Hargreaves Lansdown, the biggest platform in the UK, which announced fees of 0.45% for holdings up to £250,000, and 0.25% for accounts worth between £250,000 and £1 million.
In a further challenge to Hargreaves Lansdown, Fidelity is offering to rebate any exit fees paid by investors exiting rival platforms – Hargreaves Lansdown last week announced exit fees of £25 plus VAT, along with £25 plus VAT to exit each fund. Fidelity is also not charging any exit fees.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
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.
Annual management charge
If you put money in an investment or pension fund, you’ll not only pay a fee when you initially invest (see Allocation Rate) but also a fee every year based on a percentage of the money the fund manages on your behalf. Known as the AMC, the actual percentage varies according to the particular fund, but the industry average for active managed funds is 1.5%.