Low-cost investment giant Vanguard is introducing a £4 a month minimum charge that will make it more expensive for some DIY customers.
The fee will apply to those who have total invested balances of less than £32,000. It means someone with, say, a stocks and shares ISA worth £20,000, or a self-invested personal pension (Sipp) worth £10,000, will pay more from 31 January.
Investors with more than £32,000 on the Vanguard platform will continue to pay the 0.15% annual fee.
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According to Holly Mackay at the consultancy Boring Money, the move effectively ends Vanguard’s “reign as the lowest-cost option for smaller DIY investors seeking some choice”.
Justin Modray, founder of Candid Financial Advice, tells MoneyWeek the move was somewhat inevitable as without a minimum annual account fee, “smaller accounts are probably unprofitable”.
He says those with very small accounts will now find it incredibly expensive to have their money on the Vanguard investment platform. “For example, invest £1,000 and your annual Vanguard ISA account charge will effectively be 4.8%, which is a non-starter.”
How is Vanguard changing its fees?
Vanguard is overhauling its fees for UK customers from 31 January. It is making two changes. First, a minimum account fee of £4 per month (£48 a year) for balances of up to £32,000 will be brought in for Vanguard ISA, Sipp and general accounts. This will replace the current 0.15% annual charge.
The platform says this is “necessary to help us cover the rising cost of serving our clients”.
It means an investor with £10,000 in a do-it-yourself ISA will pay £48 a year, more than triple what they currently pay (£15). Fund fees are levied on top.
The account fee of 0.15% per year for balances in excess of £32,000 will remain unchanged and continue to be capped at £375 per year.
The minimum fee will not apply to Vanguard’s junior ISA or managed service offer.
The other change is a cut to the fee on its “managed ISA service”. The management fee will be reduced from 0.3% to 0.2%. Total fees will become 0.51%, consisting of a 0.15% platform fee, 0.2% management fee and 0.16% fund fees. There will be no minimum account fee.
Ben Summers, head of personal investor services, UK, at Vanguard, says the change to its managed ISA service will help “many first-time investors manage and grow their money”.
He adds: “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 Modray, 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 0.51% a year all in. 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 will make 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. Mackay notes that it’s interesting that Vanguard announced its fees shake-up on the same day the Financial Conduct Authority set out proposals for providing “targeted support” to savers and 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 (current pricing) | £8 | £23 | £38 | £75 | £150 | £375 | £375 | £375 |
| Vanguard (from 31 January 2025) | £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 will work out cheaper for small accounts once the Vanguard changes come into effect.
For example, on a £1,000 investment, Bestinvest charges 0.4 per cent, which would mean fees of £4 a year. Hargreaves Lansdown, Britain’s largest DIY investment platform, charges up to 0.45 per cent, so £4.50 a year on a £1,000 investment. This compares to Vanguard’s new fee of £48 a year. This excludes 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 currently charges, and is designed for beginner investors.
Steve Nelson, insight director at the lang cat, a consultancy, adds that “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, which wrappers you use are all examples that can affect pricing – alongside sums invested”.