Katie Williams
Investment giant Vanguard has urged customers to review their account in light of recent fee changes, warning its service “may no longer be right” for them.
The investment platform introduced a £4 minimum monthly fee for DIY investors last month (28 February), having previously charged just 0.15% per year.
The changes impact smaller investors with less than £32,000 in their ISA, SIPP or general investment account. Those with more will continue to pay 0.15%.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
It means someone with £1,000 in their account will now pay £48 per year in account fees, up from £1.50 previously – equivalent to 4.8%.
For context, the FTSE 100 delivered a total return of 9.7% in 2024, meaning the Vanguard fee would have wiped out approximately half of your returns in this example.
In an email to some customers, seen by MoneyWeek, Vanguard warned that the new fee could “erode” their pot if they made “no or insufficient contributions”.
Customers should either invest more regularly to get better value for money, the email suggested, or consider switching to a managed-ISA or managed-SIPP account where the £4 monthly charge does not apply.
Alternatively, they could choose to close their account, withdrawing the money or transferring to another provider.
While you are under no obligation to follow the guidance in the email, it would be unwise to leave your money where it is if you only have a few thousand pounds in the account.
As Holly Mackay at the consultancy Boring Money points out, the minimum fee effectively ends Vanguard’s “reign as the lowest-cost option for smaller DIY investors seeking some choice”.
Investors may want to take heed of Vanguard’s warning and shop around for a better deal elsewhere. Just remember that there are rules and tax implications when moving money from an ISA or SIPP, so it is important to follow the proper transfer process.
How is Vanguard changing its fees?
Vanguard has recently made two changes to its fees for UK customers.
The first change was the introduction of the minimum account fee of £4 per month (£48 a year) on balances up to £32,000. This applies to self-managed ISAs, SIPPs and general accounts, and replaces the current 0.15% annual charge.
The platform said the change was “necessary to help us cover the rising cost of serving our clients”.
The account fee of 0.15% per year for balances in excess of £32,000 remains unchanged, and continues to be capped at £375 per year.
The minimum fee does not apply to Vanguard’s junior ISA or managed-service offering.
The second change was a cut to the fee on its “managed-ISA service”. The management fee was reduced from 0.3% to 0.2% at the end of January.
This took total fees on the managed ISA to just over 0.5%, consisting of a 0.15% platform fee, 0.2% management fee and average 0.17% fund fees. There is no minimum account fee.
Ben Summers, Vanguard’s head of personal investor services in the UK, said the change to the platform’s managed-ISA service would help “many first-time investors manage and grow their money”.
He added: “We’ve found that once people have made the important decision to start investing, they can lack confidence in the management of their investments, hold too much cash, and have trouble constructing portfolios with the right funds and level of risk.
“This service selects and manages investments on a client’s behalf, and a team of Vanguard investment experts are on hand to give guidance.”
According to Justin Modray, founder of Candid Financial Advice, if you’re happy to let Vanguard choose and manage a mix of funds for you, then the managed ISA “looks very good value at 0.52% a year all in”. He added: “That said, Vanguard is restricted to its own funds, whereas most other platforms offer funds from across the market”.
How competitive are the new fees?
The new £48 annual charge makes Vanguard’s fees less competitive for new investors and those with smaller balances.
All customers with an ISA, SIPP and/or general investment account with less than £32,000 invested across them will see their fees go up.
Mackay comments: “Vanguard’s USP has always been about cost. Not service. This move has a subtle impact. It removes them from being an option where no one needed to worry about cost, to an option where people need to do the maths. They are not the slam dunk they once were.
“We saw a similar thing in 2019 when Charles Stanley moved its admin fee from 0.25% to 0.35%. Overnight, they lost their USP – always being the cheapest – so consumers lost the ‘no-brainer’ reason to select them.”
She agrees with Modray that Vanguard’s managed ISA now looks “more compelling”, so could be a good option for less confident investors.
Investment platform | £5,000 | £15,000 | £25,000 | £50,000 | £100,000 | £250,000 | £500,000 | £1,000,000 |
|---|---|---|---|---|---|---|---|---|
AJ Bell Youinvest | £31 | £56 | £81 | £143 | £268 | £643 | £893 | £893 |
Aviva Consumer Platform | £20 | £60 | £100 | £200 | £375 | £900 | £1,525 | £1,525 |
Barclays | £13 | £38 | £63 | £125 | £250 | £525 | £650 | £900 |
Bestinvest | £20 | £60 | £100 | £200 | £400 | £1,000 | £1,500 | £2,000 |
Charles Stanley Direct | £18 | £53 | £88 | £175 | £350 | £875 | £1,375 | £2,125 |
Close Brothers A.M. Self Directed Service | £13 | £38 | £63 | £125 | £250 | £625 | £1,250 | £2,250 |
Fidelity Personal Investing | £90 | £90 | £88 | £175 | £350 | £500 | £1,000 | £2,000 |
Halifax Share Dealing | £150 | £150 | £150 | £150 | £150 | £150 | £150 | £150 |
Hargreaves Lansdown | £23 | £68 | £113 | £225 | £450 | £1,125 | £1,750 | £3,000 |
Interactive Investor (Essentials Plan) | £108 | £108 | £108 | - | - | - | - | - |
Interactive Investor (Investor Plan) | £144 | £144 | £144 | £144 | £144 | £144 | £144 | £144 |
iWeb | £60 | £60 | £60 | £60 | £60 | £60 | £60 | £60 |
Santander | £18 | £53 | £88 | £175 | £275 | £575 | £1,075 | £1,575 |
Willis Owen | £20 | £60 | £100 | £200 | £350 | £650 | £1,025 | £1,775 |
Vanguard (old pricing) | £8 | £23 | £38 | £75 | £150 | £375 | £375 | £375 |
Vanguard (new pricing) | £48 | £48 | £48 | £75 | £150 | £375 | £375 | £375 |
Source: The Lang Cat. Notes: Pricing is for annual cost, as of July 2024 (bar the new pricing for Vanguard). Assumes investing in an ISA / general account for funds only, with 12 ad-hoc trades a year.
Which are the cheapest investment platforms?
Platforms like AJ Bell, Bestinvest and Hargreaves Lansdown now work out cheaper than Vanguard for small accounts.
For example, on a £1,000 investment, Bestinvest charges 0.4%, which would mean fees of £4 a year. Hargreaves Lansdown, Britain’s largest DIY investment platform, charges up to 0.45%, so £4.50 a year on a £1,000 investment. This compares to Vanguard’s new fee of £48 a year. These platform charges exclude fund fees.
According to the analyst Platforum, a customer with £10,000 split equally across an ISA and a personal pension would pay a total fee of £70 a year with Vanguard, including the fund charges. In contrast, AJ Bell’s cost amounts to £47 while Hargreaves Lansdown’s fee comes to £67.
Those facing a hike in fees with Vanguard and wanting to switch to a competitor could consider AJ Bell’s app-only service Dodl. It charges 0.15%, the same amount that Vanguard used to charge, and is designed for beginner investors.
Steve Nelson, insight director at The Lang Cat, a consultancy, said: “Investors need to take many factors into account when looking at how platforms compare on cost. The type of asset being invested in, how often you’re likely to trade, and which wrappers you use are all examples that can affect pricing – alongside sums invested.”
-
Wise shares soar on plans to list in USFintech sensation Wise’s plans for a new primary listing in the US pile on the misery for London’s stock market
-
When is the Spending Review – and what could be announced?Chancellor Rachel Reeves is facing some difficult choices in the upcoming Spending Review, which will be unveiled next week. We look at what could be announced
