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You could be paying thousands more in administration fees than you need to by choosing the wrong platform
February 16, 2017

The annual administration fee you pay to your investment platform has a big impact on your returns, but many investors are not even aware that they pay administration fees, reports Alliance Trust Savings.

Recent research by the investment platform found that one-third of the investors surveyed believed they did not pay any administration fee for their investments, with 43 per cent of investors over 45 years of age believing they did not pay them.

But on a portfolio worth £1m, the amount investors pay in annual administration fees alone can vary by as much as £1,300. Platforms such as iWeb and Alliance Trust Savings both charge flat fees, meaning this remains the same regardless of portfolio size. But TD Direct Investing, which has percentage-based fees, charges administration fees of £1,740 for a Sipp portfolio worth £1m.

The difference between percentage-based and flat fees can have a big impact on the amount you pay to hold your investments on a platform. Percentage-based fees tend to benefit those with smaller pots, while flat fees generally benefit those with larger sums.

Alliance Trust Savings found that a £150,000 individual savings account (Isa) investment pot could be worth £19,000 more after 20 years if it was held on a platform with a flat fee rather than a percentage-based fee (assuming growth of 5 per cent per year, and comparing the broker's own £10 per month flat fee to an annual fee of 0.35 per cent). But only one-third of respondents surveyed knew whether they paid a flat fee or a percentage-based fee.

 

 

Of the five largest platforms by assets under administration, for fund portfolios worth £500,000 and £250,000, Hargreaves Lansdown has the highest Sipp and Isa fees.

But deciding which platform is best for you is about more than just the annual administration fee. Annual platform costs vary widely depending on how many deals you make each month, as trading fees can stack up if you buy and sell investments frequently. For example, Alliance Trust Savings charges £12.50 per online trade, but iWeb charges just £5 a trade.

You also need to consider how much information you want from your platform, and what type of investments you plan to hold.

Administration fees can differ widely even within the same provider depending on whether you invest more of your portfolio in funds, or stocks and shares. For example, Hargreaves Lansdown levies fees of £3,000 for fund portfolios worth £1m and £1,750 for fund portfolios worth £500,000, but it caps its annual fees at £200 for portfolios held in stocks and shares, including exchange traded funds and investment trusts. This means that two investors with a portfolio of the same size held with Hargreaves Lansdown could pay different annual fees to each other, with the difference being as much as £2,800.

Barclays Stockbrokers charges an annual administration fee of £155 and 0.35 per cent of the value of the funds a year, for a portfolio made up of funds, and stocks and shares worth up to £500,000. But it waives the administration fee if the portfolio is entirely invested in funds.

TD Direct charges a 0.25 per cent Sipp fee capped at £200 per year for portfolios composed of stocks and shares, but levies a fund custody charge, which ramps up the bill for portfolios invested in both stocks and shares, and funds.

Check out our Broker Comparison tool for a quick assessment of how much you could be charges based on your portfolio and investments

 

 

Platform annual administration and account fees

 

Broker/platformSipp annual admin and account fees  
Alliance Trust Savings£17.50 a month (while saving).
AJ Bell YouinvestShares: 0.25%-£25 per quarter. Funds: 0.25% on £0-£250,000; 0.10% on next £250,000-£1m; 0.05% on next £1m-£2m; no charge over £2m
Barclays£155 a year and fund admin fee of 0.35% a year, between £0 and £500,000 of fund holdings No flat fee when account held only in funds.
Bestinvest0.3% a year on assets between £0 and £250,000, 0.2% on next £250,000-£1m, free over £1m.
Charles Stanley Direct0.25% on fund holdings and 0.25%-£240 max per year on stocks and shares. 
Fidelity Personal Investing£45 a year for funds £0-£7,499.99. 0.35% on £0-£249,999. 0.20% on £0-£1m. Fee capped at £45 a year for ETFs and investment trusts. 
Hargreaves Lansdown0.45% a year om funds £0-£250,000, 0.25% next £250,000-£1m, 0.10% on next £1m-£2m. Shares, investment trusts, gilts and bonds 0.45% capped at £200 per year.
Halifax Share Dealing

£22.50 per quarter on less than £50,000, £45 per quarter on over £50,000.

Interactive Investor£120 a year.
iWeb£22.50 per quarter on accounts less than £50,000 and £45 over £50,000.
TD Direct0.25% of value of the Sipp per charging period, min £40+VAT, max 100+VAT. Min £80, max £200 per year. Platform fee for holding funds of 0.30% to value of £250,000, 0.20% above £250,000 and max £750 per charge period, £1,500 max per year.

 

Source: provider platforms

 

Annual admin costs of a DIY Sipp invested in Oeics and unit trusts

 

 Portfolio size
Platform£50,000£100,000£250,000£500,000£1,000,000
Alliance Trust Savings£252£252£252£252£252
Barclays£175£350£875£1,750£1,750
Fidelity Personal Investing£175£350£500£1,000£2,000
Hargreaves Lansdown£225£450£1,125£1,750£3,000
TD Direct£390£540£990£1,490£1,740

 

 

Annual admin costs of DIY Sipp held in stocks, shares, investment trusts*

 

 Portfolio size
Platform£50,000£100,000£250,000£500,000£1,000,000
Alliance Trust Savings£252£252£252£252£252
Barclays£330£505£1,080£1,855£1,905
Fidelity Personal Investing£45£45£45£45£45
Hargreaves Lansdown£200£200£200£200£200
TD Direct£125£200£200£200£200

 

*No dealing fees included

Source for first table: the lang cat. Comparison tables are between top five direct platforms by AUA (source: Platforum at 30 March 2016). Tables compare the cost of holding an ISA/SIPP for a year. Assume 4 deals in these during that time and do not take investment charges into account. Assume portfolio value does not change over the year. Based on Alliance Trust Savings new charges from 1 February 2017 and the charges of other platforms from publicly available information at 10 January 2017. Source for second table: Investors Chronicle survey using same criteria as above.